Big hurdles for MultiChoice’s R55 billion takeover

MultiChoice and French media giant Canal+ have extended the deadline for regulatory approval of their R55 billion takeover deal to October this year.

After years of buying the company’s shares on the open market, Canal+ made a formal offer to acquire MultiChoice in 2024 for R125 per share.

This transaction requires several regulatory approvals, including competition clearance from the Competition Commission and approval from the Independent Communications Authority of South Africa (ICASA).

Initially, the companies set the long stop date – the deadline by which all regulatory approvals must be obtained for the transaction to proceed – as 8 April 2025.

However, on Tuesday, 4 March 2025, the companies said in a joint announcement that this deadline has now been extended to 8 October 2025.

They explained that this extension would “provide ample time for the fulfilment of the conditions”.

The regulatory approval process for this deal is expected to be complex, as MultiChoice is a major player in South Africa’s broadcasting industry.

The Competition Commission will likely conduct a thorough assessment of potential market dominance concerns, with MultiChoice already dominating the pay-TV market in South Africa through DStv.

In addition, ICASA regulates broadcasting licences in South Africa and any change in ownership requires its approval.

Some previous takeover deals regulated by ICASA involved an extensive process, including public hearings, consultations, and additional compliance requirements.

This MultiChoice and Canal+ deal is made more complex by the fact that Canal+ is a foreign company.

In South Africa, the Electronic Communications Act (ECA) limits foreign control of commercial broadcasting services through strict ownership rules.

It states that a foreigner may not, whether directly or indirectly, exercise control over a commercial broadcasting licensee.

In addition, not more than 20% of the directors of a commercial broadcasting licensee may be foreigners.

With Canal+ looking to buy MultiChoice in its entirety, this legislation may represent a significant roadblock.

Previously, when Canal+ was buying up MultiChoice shares, the two companies said their compliance with the ECA was ensured through restrictions in MultiChoice’s Memorandum of Incorporation (MOI), where voting rights for foreigners collectively are limited to 20%.

A takeover will not be as simple, and South Africa’s unique ownership requirements complicate this process even more.

Since announcing the deal, Canal+ has said it is fully committed to maintaining MultiChoice’s BBBEE credentials and acknowledged the “key role” played by Phuthuma Nathi in this regard.

MultiChoice created the Phuthuma Nathi scheme in 2006 to offer Black South Africans the chance to own an indirect stake in the company, and the scheme now owns 25% of MultiChoice South Africa.

Canal+ and MultiChoice have made it clear that they will do what it takes to gain regulatory approval.

They recently revealed the new structure MultiChoice will adopt if Canal+’s buyout offer is approved.

The part of its business that currently holds the broadcasting licence in South Africa and the entity which contracts with South African subscribers will be carved out as an independent entity known as LicenceCo.

The remainder of MultiChoice’s video entertainment assets will remain part of the MultiChoice Group.

The company explained that LicenceCo will continue to hold the subscription broadcasting licence in South Africa and contract with MultiChoice’s South African subscribers.

In addition, LicenceCo will be majority-owned by historically disadvantaged persons, including:

• Phuthuma Nathi (27% economic interest)
• Black-owned firms (Identity Partners Itai Consortium & Afrifund Consortium)
• Workers’ Trust (ESOP)

MultiChoice Group will hold 49% economic interest and 20% voting rights in LicenceCo.

The company will also retain 75% of MultiChoice South Africa – excluding LicenceCo – while Phuthuma Nathi keeps its 25% stake.

Canal+ CEO Maxime Saada said the decision to extend the long stop date for this transaction shows the companies’ commitment to have this deal go through.

“Our decision to extend the Long Stop Date reflects our recognition of the hard work and positive progress achieved by all the parties and stakeholders in working toward securing the necessary clearances for this transformative transaction,” he said. 

“The timing of this transaction is critical, and we will continue working tirelessly to ensure the finalisation of the transaction within this timeframe to ensure it retains its intended value and impact for all stakeholders.”

MultiChoice CEO Calvo Mawela said the teams continue to make great progress on this transaction. 

“We remain committed to concluding a successful transaction that will create positive value for our customers, our shareholders and all other stakeholders in our ecosystem,” he said.

Urquhart Partners’ Richard Cheesman previously told Daily Investor that this deal will likely take a long time to complete.

“It could take more than a year to complete, and the agreement allows for up to two years for the transaction to be finalised. It would be surprising if this is completed in less than a year,” Cheesman said.

“It’s a very complicated transaction, but the parties seem committed and can get it through.” 

“Both parties seem to be trying to make it work, everyone will have to be appeased.” 

“It’s a difficult task, but with management on board, and if Canal+ comes with a good enough offer for the regulatory bodies, it seems likely to be able to get it through.”