As French broadcaster Canal+ intensifies its plans to take over MultiChoice, board ructions have emerged at Africa’s biggest pay-TV operator over a last-minute U-turn by chair Imtiaz Patel, who has put his retirement on hold to oversee the multibillion-rand transaction.
Business Times understands from several highly placed insiders that the matter was debated extensively at an explosive board meeting on March 28, with some board members initially doubting the correctness of the decision.
MultiChoice announced last Tuesday that Patel, who has been at the helm since December 2018, had rescinded his decision to retire at the end of March and hand over the reins to Elias Masilela. At this meeting, it was agreed that Masilela would assume the newly created role of deputy chair.
This is in the wake of a firm mandatory offer from Canal+ to buy the rest of the shares.
In February, the board of MultiChoicerejected a R105 per share offer from Canal+, saying it significantly undervalued the group and its future prospects. A few days later, the French group further increased its shares to breach the 35% mark, triggering a mandatory offer to the rest of the shareholders as required under the Companies Act.
This week MultiChoice and Canal+ issued a joint statement tabling a revised offer of R125 for the rest of the shares, valuing the company at R55bn.
MultiChoice has constituted an independent board, which has appointed Standard Bank as independent experts to express a view on the fairness and reasonableness of the terms of the offer. The independent board is made up of four existing MultiChoice board members.
Politically, the French are being kicked out of West Africa, so why must SA allow them to take control of our media business?
— ANC NEC member
On Monday, when the revised offer was announced, Canal+ held 36.6% of MultiChoice, but by Friday morning it had increased its stake to 40.01%.
Patel’s decision to stay on has also brought into question MultiChoice’s controversial consultancy fees that it pays to selected board members as opposed to normal director fees, as he will continue to earn these consultancy fees.
The surprising turn of events took place at a board meeting held a day before Easter Friday, where Patel was expected to stand down. The meeting was chaired by lead independent director Jim Volkwyn. The role of independent lead director has since been subsumed into Masilela’s deputy chairship.
Patel’s about-turn, insiders said, gave the impression that Masilela, who has also been on the board since 2018, was not capable of handling the proposed deal.
In response to questions, MultiChoice said the decision to extend Patel’s tenure was unanimous and strongly supported by Masilela, “in the best interests of business and shareholders”.
“As the precise timelines for the conclusion of the proposed Canal+ transaction are uncertain, Mr Patel agreed to extend his tenure until the conclusion of the transaction or such sooner date as may be determined in light of progress.”
The company said it has not received any negative feedback from shareholders regarding this decision.
Patel referred Business Times to MultiChoice's response. Masilela told Business Times he supported the decision.
However, an observer speculated that Patel’s mandate could be to make sure the Canal+ transaction was successful as the company has entered into a corporation agreement.
Before his appointment as chair, Patel held a number of executive roles at MultiChoice and under his leadership the company recorded significant growth milestones. However, it was during his tenure as chair that the company was heavily criticised for a partnership with SABC that resulted in the public broadcaster selling its archived content to the pay-TV group.
MultiChoice said the extension of Patel’s term will not result in him receiving any additional fees beyond those he was already due to receive via his consultancy agreement. In the 2023 financial year, Patel was paid $1.1m as part of his contractual agreement with the company in relation to specific professional advisory services.
Volkwyn also earned consultancy fees, of R5.1m, “for professional advisory services provided to the group CEO on a regular and extensive basis”.
MultiChoice said the fee structure for nonexecutive directors was designed to ensure “we attract, retain and appropriately compensate a diverse and experienced board of nonexecutive directors”. Such directors receive an annual fee as opposed to a fee per meeting, which recognises their ongoing responsibility to ensure effective governance of the group.
“Two of the 12 MultiChoice board members — Mr Patel and Mr Volkwyn — currently have contractual agreements with the company in relation to specific professional advisory services.”
Our increased share ownership demonstrates the confidence we have in the long-term potential unlocked by combining Canal+ and MultiChoice, which will benefit both companies, all shareholders, consumers and South Africa’s creative industries
— Canal+
If the independent board recommends that shareholders accept the offer, the deal is expected to face regulatory scrutiny. Section 64 of the Electronic Communications Act states that a foreigner may not, whether directly or indirectly, exercise control over a commercial broadcasting licensee; or have a financial interest or an interest either in voting shares or paid-up capital in a commercial broadcasting licensee, exceeding 20%. Not more than 20% of the directors of a commercial broadcasting licensee may be foreigners.
However, reports indicate that South African billionaire Patrice Motsepe is in discussions with Canal + to join its bid for MultiChoice, which some have viewed as a way of trying to comply with local ownership regulations.
In an interview with Business Times on Monday, Canal+ chair and CEO Maxime Saada would not comment on the reported Motsepe bid.
He said Canal + had made proposals that were compatible with the regulatory requirements.
“MultiChoice is leaning on our solutions, which is new. As you know, before we raised our offer we didn’t have the support of the company. Now we have the support, which changes everything.
“We are finally able to convince them of the value of the combination ... it has become more obvious that it is a necessity that we need to be bigger to face [streaming] giants particularly from the US. Neither Canal+ nor MultiChoice are at scale even though they have been successful [in traditional pay-TV business], the combination will make it a viable competitor.”
Asked about the decision to increase its shareholding to 40% on Friday, Canal+ said: “Our increased share ownership demonstrates the confidence we have in the long-term potential unlocked by combining Canal+ and MultiChoice, which will benefit both companies, all shareholders, consumers and South Africa’s creative industries.”
The Public Investment Corporation (PIC), which owns 15.1% of MultiChoice, said it will “assess closing offers that are presented to shareholders and will engage directly with MultiChoice as the investee company”.
Business Times understands the PIC is considering accepting the offer.
However, some prominent members of the governing ANC are unhappy with a transaction that, if successful, will see one of South Africa’s most successful companies controlled by a French entity.
“Politically, the French are being kicked out of West Africa, so why must we (South Africa) allow them to take control of our media business?” a national executive committee member told Business Times.
Asked for comment, Nkenke Kekana, the ANC’s head of subcommittee on communications, said the party has not had any engagement with the leadership of MultiChoice. However, he emphasised that “the law is clear” on foreign ownership of local broadcasters.“Let the law take its course in guiding this transaction. We still don’t understand the nature of the transaction and will engage with the leadership of MultiChoice.”
Canal+ said its ambition is to build a global entertainment leader that will take African stories to a global audience. It said previously the acquisition of MultiChoice would create a group with significant resources and scale to compete with US giants who are dominating the global video content market.
Canal+, which is preparing a separate listing after being unbundled from parent firm Vivendi, has a presence in more than 50 countries across Europe, Africa and Asia. It has been involved in Africa for 32 years. In Africa, it has about 8-million subscribers in 23 countries while MultiChoice has 22-million subscribers across 16 countries.
