How South African investors could benefit from R53 billion MultiChoice buyout

Should Canal+’s bid to buy MultiChoice go through, the company could list on the JSE, providing South African shareholders exposure to the company’s potential future profitability.

Urquhart Partners’ Richard Cheesman told Daily Investor that Canal+ and MultiChoice could benefit from the buyout.

His comments come after Vivendi SE’s Canal+ made an all-cash formal offer for MultiChoice on 8 April 2024.

Canal+ valued the South African broadcaster’s shares at R125 apiece, leading to a total valuation of around R53 billion.

The French media giant has many hurdles to overcome before this deal will go through, many of which are regulatory in nature.

To “sweeten the deal”, Canal+ has said it could list on the JSE following its unbundling from Vivendi and the MultiChoice transaction.

In the latest update on Canal+’s offer, the company said it is undertaking a feasibility study for the proposed split into several separately listed entities, which was first announced on 13 December 2023.

“Canal+ intends that should its planned European listing proceed, there will be an opportunity for South African investors to become shareholders of the combined entity as part of a secondary inward listing on the JSE,” it said. 

“In particular, if Canal+’s listing occurs before the offer closing, Canal+ will consider revising the terms of the offer and extending to MultiChoice Shareholders an opportunity to have exposure to the combined group through this listing.” 

Cheesman explained that if Canal+’s unbundling from Vivendi happens before the MultiChoice transaction closes – which is entirely plausible – the offer could change to include a partial share offer.

“Canal+ may give MultiChoice shareholders the option to take a reduced cash component of the offer price in lieu of a portion of Canal+ shares being added to the mix.” 

Cheesman said this could address concerns that current MultiChoice shareholders will not be able to benefit from the partnership between MultiChoice and Canal+.

He said there is significant potential for profitability and growth that could come from the synergies of this partnership.

“There will be reduced content costs as all content producers will just have one company to negotiate with to sell all their content into the whole of Africa,” he explained. 

“That position should be very valuable – being able to go to one entity to sell content to the huge and growing population of Africa.”

He said this would also mean reduced satellite lease costs as the two parties will consolidate their satellite leases over time, and reduced technology development costs, as well as potentially improved tax efficiency.

In addition, MultiChoice has projects that it has invested billions in but from which shareholders are yet to benefit.

For example, if this deal goes through, shareholders could miss out on MultiChoice’s potentially improved profitability from recently launched ventures like SuperSportBet and Showmax 2.0. 

These ventures could experience J-curve growth and profitability, unlocking significant value for MultiChoice shareholders.

Cheesman said that even if Canal+’s unbundling does not happen before the MultiChoice deal goes through, the company will likely still list on the JSE.

“Then it won’t be a partial share offer, but you would be able to buy the shares and still follow the company,” he said.