All eyes are on MultiChoice shareholders — will they or won’t they accept the Canal+ forced mandatory offer?
On Tuesday French media company Canal+ submitted its mandatory bid to acquire the remaining 64.99% of MultiChoice shares, priced at R125 per share. This move follows an extension granted to Canal+ until April 5 2024 to finalise its mandatory offer.
However, the forced mandatory offer is below MultiChoice’s net asset value (NAV), which sits at R181 a share. The rather wide price differential is reason enough for MultiChoice shareholders to dig in their heels and reject the mandatory offer by Canal+.
Earlier in 2024, Canal+ increased its ownership in the DStv operator to 35.01%, triggering a provision under the South African Companies Act mandating a buyout offer for the remaining shares.
Initially Canal+ proposed to acquire MultiChoice at R105 per share, but the board of MultiChoice rejected the offer. MultiChoice deemed this proposal insufficient as it did not meet the statutory requirements for a mandatory offer.
The Takeover Regulation Panel compelled Canal+ to make an immediate mandatory offer.
The French media company surprised the market by tabling a R125 a share offer to the minorities on Tuesday, a day after it was given a 25-day extension by the panel to make a mandatory offer. The offer will be assessed by the independent board of MultiChoice which will, after receipt of the independent expert’s opinion, provide its opinion and recommendation.
It will cost Canal+ about R36bn to buy more than 288-million shares at R125 per share.
I believe this offer is not sweet enough and I expect the independent expert to advise as such. The French company needs to add more sweeteners. After all, Canal+ did not want to make the mandatory offer but was forced to do so by MultiChoice and the panel.
Email correspondence I’ve seen between the panel, Canal+ and MultiChoice attorneys shows that the French company was reluctant to make the mandatory offer. Enter the legal eagles. Bowmans represented Canal+ while MultiChoice had Webber Wentzel.
In an email, Bowmans informed the panel that a mandatory offer need not be made as they contended that Canal+ asserted that it would not be able to exercise 35% or more of the voting rights required to trigger a mandatory offer to all shareholders of MultiChoice.
As things stand, the memorandum of incorporation for MultiChoice limits voting rights of foreign shareholders to 20%. Therefore, Canal+ cannot exercise voting rights on MultiChoice.
On Tuesday it appeared that the market was happy with the Comcast deal to buy into Showmax rather than Canal+ making a mandatory offer for all MultiChoice’s shares it does not own. On March 6 2023 MultiChoice’s stock had risen to R147 a share after Comcast announced a partnership that has resulted in the relaunch of a new version of Showmax, termed “Showmax 2.0,” which will be powered by NBCUniversal’s Peacock technology platform.
MultiChoice owns 70% of the partnership and the rest belong to Comcast. Juxtapose that with the forced offer by Canal+ to buy out minorities. The MultiChoice share price climbed to R118.87 in early trade on Tuesday to close at R113.84, failing to reach the mandatory offer price of R125 a share.
In that regard, MultiChoice shareholders are faced with big decisions to make. The Canal+ R125 a share offer is far from the 52-week high of R147 a share for MultiChoice.
I am compelled to argue that never mind the NAV of MultiChoice sitting at R181, no-one is coming back from Dubai, where the executives of MultiChoice are based. Not even its CEO Calvo Mawela can be expected to move for only R125 a share. By March 31 2023, Mawela had 173,471 direct shares in MultiChoice and at this price they will be valued at about R21.7m.
Maybe Canal+ is banking on a possible intrinsic NAV price of various institutional shareholders being closer to or less than R125 a share. The French media company has not disclosed its intrinsic NAV per share. All the same, MultiChoice’s shareholders are allowed to take an offer even if it’s below a discount NAV.
It’s their choice. They can sell at an intrinsic NAV price they deem fit. That said, is a hostile takeover bid by Comcast in the offing should Canal+’s mandatory offer be rejected?
Could it be that Comcast is only interested in being a partner for Showmax, or is there a clause in the MultiChoice partnership that prevents it selling Showmax to any bidder? Did Comcast create a first right of refusal condition in that partnership to ensure that it remains a Showmax shareholder?
Comcast appears nonchalant about the mandatory offer by Canal+ for MultiChoice. It would have been foolish for Comcast to continue with its huge investment in Showmax knowing very well that ownership will soon change to Canal+.
The complex moves to control MultiChoice are not over by any chance. Watch this space.
Correction: Monday March 11 2024
The statement regarding the Takeover Regulation Panel's assessment of the proposal has been clarified. We have also updated the shareholding information for Showmax to accurately reflect that MultiChoice owns 70% and the rest is owned by Comcast.
• Lourie is founder and editor of TechFinancials.
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