Multichoice can be delisted from the JSE

Multichoice announced that Canal+ could apply for the termination of the listing of all its shares from the Johannesburg Stock Exchange (JSE) should a certain condition be met.

On Tuesday, Multichoice posted details about a mandatory offer by Canal+ to Multichoice shareholders.

Canal+ made a cash offer to all Multichoice shareholders for R125.00 per share. It already owns 45.2% of MultiChoice.

The offer opens on Wednesday, 5 June 2024, and will remain open for at least 30 business days.

The most interesting part of the offer was contained in the fine print, which explained the rights of current shareholders.

The Multichoice shareholders who do not accept the Canal+ offer will remain shareholders once the offer is implemented.

However, if the offer is accepted by Multichoice shareholders holding at least 90% of shares, Canal+ has the right to invoke the provisions of section 124(1) of the Companies Act.

Section 124(1), known as compulsory acquisitions and squeeze-out, gives details on when a company has the right to buy remaining shares from shareholders.

Simply put, if Canal+’s offer is accepted by enough shareholders for it to own above 90% of Multichoice, it can buy the rest of the shares at the same price.

It does not need approval from shareholders who did not accept the R125 offer to buy their shares at this price.

Should this happen, Canal+ can apply for the termination of the listing of all Multichoice shares from the JSE’s main board and A2X, where it is listed.

If section 124(1) of the Companies Act is not invoked, Multichoice will continue to be listed on the JSE and A2X.

Canal+ offer for Multichoice

Urquhart Partners’ Richard Cheesman previously told Daily Investor that Multichoice is an exceptionally difficult company to evaluate due to its structure and different components.

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

“The valuation of Multichoice is quite complicated because multiple ventures are currently emerging from startup J-curves,” he said.

“The group has made significant investments, some of which are paying off and others which are only expected to be profitable in the future.”

For example, he explained that the offer considers the challenges Multichoice faces from Netflix, Amazon, and other OTT content providers.

It also considers Multichoice’s capital position, which includes gross debt of R8.1 billion at the end of September 2023 and other liabilities.

“Taking this into account, it looks like the core South African business is then valued at about nine times earnings, which seems to be in the right ballpark,” Cheesman said.

However, he said the offer may be fair, but it does not seem generous.

Cheesman said Multichoice has about R23 billion worth of tax losses, of which around R16 billion are in Africa.

“It’s not clear if the group’s substantial tax losses have been taken into account,” Cheeseman said.

“One would also expect that the merged group will have better profitability in Africa, meaning that these will be able to be utilised earlier than otherwise,” he said.

“Multichoice’s tax losses have substantial value, which may not have been captured in this valuation.”

In addition, the valuation does not appear to consider the potential improved profitability from recently launched Multichoice ventures like SuperSportBet and Showmax 2.0.