MultiChoice shares hit R105 on Wednesday for the first time since May 2023, putting more pressure on French broadcaster Canal+ to sweeten its offer for Africa’s largest pay-TV operator.
Canal+, which already owns more than a third of MultiChoice, wants to buy out the rest of the company at R105 a share, or just more than R31bn in what would the biggest merger & acquisition deal in SA in 2024.
The DStv owner snubbed the offer as too low for the business and its prospects, even though it is at the top end of the target price range that analysts and brokers have for the stock.
According to Infront Analytics, analysts and brokers value the stock at between R70 and R104.50, with the median R87.25.
But some analysts are changing their mind in the wake of the overtures by Canal+. Sasfin and Mergence Investments told Business Day recently that it expected a higher price for the JSE-listed group.
MultiChoice’s stance and the trajectory of the share price in recent days will test the determination of Canal+ to create an African media business powerhouse with operations in key markets on the continent, from SA and Nigeria to Senegal and Cameroon. It is unclear how Canal+ would get around SA rules that limit voting rights in media companies to 20% despite the level of economic interest.
Terence Hove, a strategist at Exness, a global brokerage house, said Canal+ would have to come back with a higher offer. “That initial offer was sent as a ‘feeler’. At times, that’s the game with these takeovers,” he said.
The share price was not a true reflection of a company’s book value but more of market sentiment, he said.
MultiChoice shares closed unchanged at R105 on Thursday after trading as high as R105.40. When the French offer came in, the share was at R75, meaning the proposed premium has already been eaten, indicating investors are betting that Canal+ will sweeten its offer.
And they may be right. Just shy of a year ago, the stock reached a record high of R155.20 but then plunged to a low of R62.31 in November, after the company said earnings fell 5% in the six months to September due to rand weakness and more spending on Showmax.
During this time, the French company took advantage of lower prices as it continued to buy up MultiChoice shares, now holding 35% of the group.
Sentiment
Hove said the current price signalled sentiment among traders and other investors that were building a position, anticipating a deal to happen. “I think they’ll come back with a stronger offer on the table. How much is it going to be? Certainly more than the R105. That R155 from March, around there and going above is probably what the MultiChoice board will start looking at and feel like something they can consider.”
Canal+, recently unbundled out of one of the world’s biggest media conglomerates, Vivendi, started building its stake with an initial purchase of 6.5% in 2020. A day before making its offer, it owned 33.06% of MultiChoice.
Through 2023, negative sentiment was largely driven by the group’s bid to take on Netflix and other big streaming competitors by pouring billions of rand into a revamped Showmax offering. Last week, the group disclosed that it and NBCUniversal, which holds a 30% stake in Showmax, would spend as much as $187m (about R3.56bn).
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