MultiChoice’s share price rocketed over 26% yesterday after Vivendi-owned French premium television channel Canal+ made a R31.7 billion offer to buy the rest of the shares in pan-African pay-TV group MultiChoice.
MultiChoice, which operates in more than 50 countries and is struggling with dwindling revenues in the face of tough competition, said yesterday Canal+ had submitted an offer to acquire all of the issued shares of MultiChoice that it does not already own, in a deal that could lead to Canal+ listing on the JSE.
Canal+ already holds 31.7% of MultiChoice, and is its biggest shareholder. It was to offer MultiChoice shareholders R105 cash per share, representing a 40% premium to MultiChoice’s closing share price of R75 on January 31, 2024.
Yesterday, the share traded as high as R95, and ended the day XX% higher at XXX.
The parties were at pains to point out that: “At this stage, there can be no certainty about the progression of the potential offer, nor the terms of any transaction that may occur.” Yesterday, commentators questioned how the deal would be structured, given MultiChoice is only allowed to grant foreign shareholders voting rights on 20% of its shares, due to South African broadcasting regulatory restrictions.
For instance, on the X social media platform, The Passive Income Guy (@hazelwood_dave) noted: “Canal+ offers to buy MultiChoice for R105. They say without bigger scale, MCG can’t compete. This is clearly an attempt to sway regulators to ignore (the) 20% limit on foreign ownership. But how can regulators ignore the law?…”
“Canal+ is respectful and observant of all laws and regulations relating to the South African media sector and companies listed on the Johannesburg Stock Exchange. Any firm intention letter submitted would be mindful of the obligations that Canal+ would have in this regard,” the company said in a statement.
Canal+ is preparing its own listing following the unbundling announcement of its parent company Vivendi last month.
“It is the ambition of Canal+ to create an African media business with enhanced scale, which can thrive in a competitive international market, better serve its consumers with a world leading offering of sports, local and global content, and ensure that Africa can tell her story to a global audience on her own terms,” a statement said.
The industry in which MultiChoice operates is becoming increasingly global and competitive, with regional media companies having to compete with the financial reserves of global media titans, with enormous resources to invest in content, marketing and technology. Scale is the only way to survive and thrive in this environment.
The companies said yesterday that a combination between them would create a group with significant scale. It would create a combined group with the ability to commit even greater investment into local content and sport, the provision of a technology platform owned by the combined company, and which would diversify the geographical footprint of MultiChoice.
If the deal did not proceed, MultiChoice’s lack of scale was likely to become a more acute problem in the coming years, risking the company’s status as the pre-eminent media company in Africa and impacting its mid-term trajectory, the companies said.
A report by PwC in November said that the emergence of streaming services has applied pressure to traditional TV services, with many now forgoing them and paying for services that instead provide an abundant amount of on-demand video content. Growth in South Africa’s entertainment and media markets is expected to outpace global markets.
Intense competition among international streaming platforms – including Disney+, Netflix, Showmax, and Paramount – is stirring up growth in South Africa’s on-demand and streaming sector and this was expected to boost revenues in South Africa’s media and entertainment (M&E) market by 5.5% annually to R231 billion over the next five years, PwC said.
Canal+ chairperson and CEO Maxime Saada said: “Canal+ is a long-term investor in both MultiChoice and South Africa, and is proud to have been actively involved in Africa’s media sector for 30 years.”
He said their offer, if successful, would be an important next step for MultiChoice to realise its full potential. 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.
Saada said they hoped to build on their strong track record of co-operating with MultiChoice to commission ambitious and authentic African content, support more local production companies and deepen access to international sport while investing in and promoting local sport and their local stars and ambassadors.
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