R2.7 billion boost for MultiChoice
MultiChoice has received the green light to sell its insurance business to Sanlam.
In June, it was announced that Sanlam Life, a wholly-owned subsidiary of Sanlam, would acquire a 60% shareholding in MultiChoice’s insurance business, NMS Insurance Services (SA) Limited (‘NMSIS’).
The long-term commercial agreement with Sanlam aims to expand insurance and related financial service offerings into MultiChoice’s extensive subscriber base on the African continent.
For the financial year ended 31 March 2024 (FY24), NMSIS increased its in-force policies by 19% to 3.3 million. Life products were introduced three years ago and have seen major growth, accounting for 30% of in-force policies.
NMSIS’s profit after tax in FY24 increased by 51% to R296 million and its net asset value was R277 million.
The parties have announced that all conditions precedent to the Transaction have been fulfilled, including receiving approvals from the Competition Tribunal and the Prudential Authority.
The Transaction is now unconditional and will take effect on 30 November 2024.
Upon the commencement date, MultiChoice will receive an upfront cash consideration of R1.2 billion for its NMSIS stake.
There is also potential performance-based cash earn-out, measured on 31 December 2026, of up to a maximum additional consideration of R1.5 billion.
Tough times
The news follows poor financial results for the private broadcaster.
The group’s interim financial statements for the period ended 30 September 2024 showed revenue plummeted, losses worsened, and its technical insolvency deepened.
Revenue for the period dropped by 11% from the prior period to R24.8 billion, and operating profit declined by 49% to R2.5 billion.
MultiChoice’s loss also increased to R1.8 billion, much worse than the previous period’s loss of R911 million.
The DStv-owner’s assets also declined from R43.9 billion to R41.5 billion, while its liabilities were flat at R44.2 billion. Thus, MultiChoice remained technically insolvent, with its balance sheet worsening significantly over the last year.
The group’s subscriber base was also under pressure, with roughly 400,000 customers in South Africa alone cutting their cords.
MultiChoice CEO Calvo Mawela said that the company needs a roughly R55 billion takeover deal with France’s Canal+ to go through so that it can compete with US streaming giants.
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