MultiChoice shares traded at their highest level since May 2023 on Wednesday after SA’s takeover regulation panel ruled that French broadcaster Canal+ is required to make a mandatory offer immediately to buy shares of pay-TV company MultiChoice that it does not already own.
Canal+, a top shareholder in MultiChoice which had a 31.67% interest when it proposed the offer, raised its stake to 35.01% after the deal’s announcement earlier in February, just above the threshold that would require the company to make a mandatory offer to shareholders.
The French group had contended that it did not need to make such an offer because of the limit on its voting ability in MultiChoice.
SA’s regulations — under the Independent Communications Authority of SA (Icasa) and MultiChoice’s own memorandum of understanding — limit foreign voting rights to 20%.
As such, Canal+ argued that because its 35% stake did not translate into the same as voting rights, it would not need to make an offer to other shareholders.
Part of the rationale for the takeover regulation panel’s threshold is to protect minority shareholders from the whims of large investors. Special resolutions usually require a two-thirds vote to be passed. Therefore, when a particular investor reaches 35% of ownership, it can effectively block such resolutions unilaterally.
However, the panel said the restriction on voting “does not apply when votes are to be cast on other (non-licensee) matters”. In other words, Canal+ has voting rights up to 35%, in so far as a matter does not have to do with MultiChoice SA, which is the holder of the group’s broadcast licence in the country.
This is why the panel made its ruling in the way that it did.
MultiChoice shares rose as high as R107.58 intraday on Wednesday, the highest level in over nine months, before paring some of those gains to close 0.47% higher at R104.84.
At the start of February, Canal+ made an offer to buy out the rest of the company at R105 a share, or just more than R31bn in what would the biggest M&A 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.
MultiChoice 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.
While some analysts are changing their minds in the wake of the overtures by Canal+, some — including Sanlam Private Wealth — are not convinced.
“While five years ago we saw potential upside in MultiChoice, the landscape has changed substantially. After the recent price jump following the Canal+ offer, MultiChoice shares are, in our view, now trading at close to fair value and we’ve consequently exited the stock in most of our client portfolios,” said Dumisani Chiume of Sanlam Private Wealth. /With Reuters
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