Shares in MultiChoice leapt almost 3% on Tuesday, their biggest one-day gain since July, as the DStv operator revealed its licence and empowerment structure for its takeover by would-be suitor Canal+.
To get the deal over the line, the companies have proposed a structure that causes the creation of a separate entity that will house MultiChoice’s broadcast licence in SA.
On Tuesday, the broadcasters said they had agreed on the structure of the group after a transaction whereby the French media group will acquire its SA-based counterpart..
The transaction faces regulatory hurdles and resistance from internal stakeholders because SA’s regulations — under Icasa and MultiChoice’s own memorandum of understanding — limit foreign voting rights to 20%. In addition, it is unclear how the French group will tackle the issue of black ownership in the transaction.
The two companies appear to have found a structure that, at least for now, appears to address both concerns.
In a joint statement the companies said the MultiChoice Group would be restructured so that the current holder of the broadcasting licence in SA and the entity that contracts with SA subscribers, MultiChoice (Pty) Ltd — or LicenceCo — would be carved out and become an independent entity.
The remainder of the group’s video entertainment assets would remain part of the MultiChoice Group.
LicenceCo would continue to hold the subscription broadcasting licence in SA and contract with MultiChoice’s local subscribers.
It will be majority owned by historically disadvantaged entities, namely: Phuthuma Nathi, which will ultimately hold a 27% economic interest in LicenceCo; two established black-owned and managed companies, Sonja de Bruyn’s Identity Partners Itai Consortium and Sipho Maskeo’s Afrifund Consortium; and a workers’ trust.
MultiChoice Group’s shareholding in LicenceCo will ultimately give it a 49% economic interest and 20% share of voting rights.
The MultiChoice Group will also retain its existing 75% direct interest in MultiChoice SA, which will exclude LicenceCo.
Phuthuma Nathi will similarly retain its existing 25% interest in MultiChoice SA.
On the news, MultiChoice shares shot up more than 3%, before closing 2.96% higher at R110.17, a sign of confidence that the companies have found a workable solution.
The Electronic Communications Act limits the control or financial interest a foreigner can have over a commercial broadcasting licensee. The restrictions on influence and control, as opposed to actual ownership, explain how Canal+ has been able to buy up such a large stake without contentious issues arising.
All this comes as the SA government is contemplating ways to allow Elon Musk’s Starlink to operate in the country, having run into similar restrictions under the same act.
In terms of the Canal+ transaction, LicenceCo will enter into various commercial agreements with MultiChoice Group subsidiaries regarding the services provided to LicenceCo by other MultiChoice Group entities.
These relate to the provision of content, technology, subscriber management and support and other functions.
There will be no disruption for LicenceCo’s SA viewers, who will continue to access its services as normal. In time those subscribers will benefit from the additional content and technology investments envisaged by the MultiChoice Group, in its capacity as supplier to LicenceCo, they said.
“Canal+ and MultiChoice are confident that the envisaged structure meets the requirements of all applicable laws, including the restrictions on foreign ownership and control of broadcasting licences contained in the Electronic Communications Act 36 of 2005,” they said.
The LicenceCo structure was submitted to the SA Competition Commission as part of filings made in September and is still under consideration.
The transaction remains subject to regulatory review across numerous jurisdictions, including SA. It will also be assessed by the independent board of Phuthuma Nathi, following the in-principle support given by the Phuthuma Nathi board to the proposed transaction.
In April last year, Canal+ and MultiChoice entered into a co-operation agreement regarding a proposed mandatory offer.
Canal+ had been aggressively buying up MultiChoice shares for almost four years after it started building its stake with an initial purchase of 6.5% in October 2020. At the beginning of February 2024, the Paris-based company made an offer to buy the rest of the company at R105 a share, or just more than R31bn, in what would have been 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 was at the top end of the target price range that analysts and brokers had for the stock. Canal+ raised its offer to R125 a share on March 5.
A day later, Canal+’s stake had grown to 35.01%, triggering a mandatory offer according to rules set by the takeover regulation panel.
“This transaction is an opportunity to create a unique global media company, with a strong presence across Africa, with the scale, expertise and creativity to compete and partner with the largest players within the media sector and beyond.
“I am confident that the contemplated posttransaction structure will comply with SA’s laws and regulations,” Canal+ CEO Maxime Saada said.
“MultiChoice has a long and proud history of creating significant value for the shareholders of Phuthuma Nathi, one of the most successful BBBEE [broad-based BEE] schemes in SA.
“To continue this journey with Phuthuma Nathi, while broadening the BBBEE participation in our business through new partnerships that also involves our staff, is an inspiring prospect,” MultiChoice Group CEO Calvo Mawela said.
Update: February 4 2025
This story has been updated with new information.
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