Potential MultiChoice buyout breaks new ground in South Africa

 ·11 Feb 2024

Canal+’s potential acquisition of MultiChoice is the first of its kind in South Africa, with huge question marks over the bureaucratic process.

On the last day of January, the French broadcaster announced its intention to acquire all of the issued ordinary shares of MultiChoice that it did not already own.

It offered to pay R105 per share in cash, representing a premium of 40% to MultiChoice’s closing share price of R75 on 31 January 2024.

“Our Potential Offer, if successful, would be an important next step for MultiChoice to realise its full potential,” said Chairman and CEO of Canal+ Maxime Saada.

“Combined with Canal+, MultiChoice would have the resources to invest in scale, local African talent and stories, and best-in-class technology to allow it to grow in Africa and compete with the global streaming media giants.

Nevertheless, the Multichoice board said that the proposed offer price of R105 per share significantly undervalues the company and its future prospects.

What happens next

At the same time as the rejection, it was announced on SENS that Canal+ has also increased its stake in MultiChoice to 35%. This triggers a mandatory offer to all shareholders as per the Companies Act.

MultiChoice has thus asked the Takeover Regulation Panel (TRP) if a mandatory offer must be made.

Speaking with the Business Times, Mike Steere from Avior Capital Markets said that the question is now if Canal+ will be forced to make another offer.

Icasa regulations restrict the French company’s voting rights to 20%, with the Companies Act specifically referencing voting rights when assessing if a mandatory offer is needed.

He added that this presents a unique case, as it is untested in law or at the TRP. If it does not have to make a mandatory offer, the French broadcaster could start buying MultiChoice shares at a huge discount to its volume weighted average price (VWAP).

All Weather Capital’s Jarred Houston said that the case is unique due to broadcasting regulatory limits on foreign ownership and voting rights versus the mandatory offer at 35% ownership level as per the Companies Act.

It thus depends on which regulation is applied and whether a mandatory offer is needed.

Houston said that the TRP’s objective is to ensure that the best interests of minority shareholders are intact, but it is unclear which decision would best achieve this.

Following the TRP’s decision, there is still significant uncertainty over how Icasa or the Competition Commission will view the transaction. ”

Read: Massive loss for Multichoice

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