Canal+ may make mandatory offer after MultiChoice spurns R105 per share valuation

MultiChoice offices in Randburg, Johannesburg. Picture: Nhlanhla Phillips Independent Newspapers

MultiChoice offices in Randburg, Johannesburg. Picture: Nhlanhla Phillips Independent Newspapers

Published Feb 6, 2024


French entertainment giant Canal+ may be forced to make a mandatory offer for MultiChoice if it decides against raising its R105 per share offer that has been turned down by the South African operator of DStv.

MultiChoice said yesterday that its board had considered and decided against the offer by Canal+ as the R105 offered significantly undervalued the company, which also has operations across Africa and offers streaming services via Showmax.

“After careful consideration, the board has concluded that the proposed offer price of R105 in cash significantly undervalues the group and its future prospects. MultiChoice has recently conducted a valuation exercise, which has valued MultiChoice significantly above R105 a share,” MultiChoice said yesterday.

There was widespread market speculation that there was a possible counter-offer from Comcast, which is already in partnership with MultiChoice in investing into the streaming platform Showmax. MultiChoice and Comcast on February 2 committed an additional $30 million (R570m) into Showmax, cementing their commitments and partnerships to the relaunched platform.

This fuelled market sentiment that Comcast could also be making a counter-offer for MultiChoice to deepen its exposure in the region. JSE analysts said it was possible that MultiChoice had turned down the initial offer by Canal+ to lay the ground for a better offer from either of the two suitors. Others said it did not make sense for Comcast to attempt a takeover as they already had exposure in the company through the joint venture in Showmax.

Godfrey Albertyn, a portfolio manager for Momentum Alternative Investments, said, however, that with Canal+ now controlling more than 35% of MultiChoice, the French entertainment giant might just “need to do a mandatory offer.”.

MultiChoice confirmed yesterday that Canal+, which controlled about 31% of the company, had now “acquired an additional interest in the ordinary shares” of the company, bringing up its interest to 35.01%.

“Canal+ above 35.01% requiring offer to minorities as we have seen) but now stumped with board turning down offer. Looks like they going to have to pay up (and) this may mean an offer that includes cash and shares vs just cash,” said another market analyst.

However, according to Capital One Partners, the R105 per share cash offer by Canal+ significantly undervalued the group.

For perspective, said Capital One Partners, MultiChoice’s equity stake in MultiChoice’s South African business was worth at least R100 per share. It put a fair value for MultiChoice at between R180 and R210 per share.

“But it will take time and effort to unlock this value. The Canal+ offer would have provided a clear-cut exit if it was pitched higher, but macroeconomics and increased investments in Showmax have weighed down on sentiment,” said Capital One Partners.

MultiChoice noted that its own evaluation of above R105 per share excluded “any potential synergies which may arise from the envisaged transaction” with Canal+.

It said since Canal+ had repeatedly parroted the advantages of the combined entity and related synergies, it needed to factor in these advantages into its offer.

“While the board is open to all means of maximising shareholder value, it has conveyed to Canal+ that – at this proposed price – the letter does not provide a basis for further engagement. Caution is accordingly no longer required to be exercised by shareholders when dealing in their securities.”

MultiChoice will, however, remain open to engagements with “any party in respect of any offer which is for a fair price” and is subject to appropriate conditions.

On social media platform X, Marlie Chunger (@JSE_Invest) described this as an “awful decision from MultiChoice” as the R105 offer was a “decent premium” to its current share price. “If Canal+ calls it a day, MultiChoice is going far below R70,” he said.

Shares in MultiChoice traded 0.2% lower at R90.12 in afternoon trade on the JSE yesterday. This sharply contrasts to the 26% rally in the MultiChoice share price on Thursday when Canal+ announced the R31.7 billion offer.