Bank of America expects Canal+, the new owner of MultiChoice, to continue slashing costs, pencilling in the sale of noncore assets after meeting the French media group’s senior executives.
The American multinational met Canal+ executives, including Amandine Ferré, group CFO; Jérôme Bretillot, deputy CFO; and Richard Tessendorf, corporate CFO at MultiChoice.
In a report released after the meeting, Bank of America says one of the key discussion points is on how Canal+ intends to turn around subscriber growth trends at MultiChoice, primarily in South Africa.
“Management prioritises deleveraging, downplaying any imminent or near-term [mergers & acquisitions] ambitions. The CEO is well incentivised on value creation, and the former African management team will relocate from France to South Africa,” Bank of America says.
“MultiChoice’s sport content offering remains unparalleled, and US competitors appear to have dialled down their African ambitions. We expect next steps will include simplification of MultiChoice’s offerings and extending existing content partnerships (eg Netflix, Apple) to MultiChoice markets.
“Optimisation of MultiChoice’s cash tax structure value unlock through monetisation of noncore or ‘less core’ assets. Timing of MultiChoice’s acquisition appears now opportune as load-shedding issues appear fixed and economic growth is expected to pick up in South Africa, Nigeria and Kenya.”
Canal+ pulled off a coup when it launched an audacious bid to buy MultiChoice in one of the largest media deals in South Africa yet.
The French major has wasted little time in reviewing MultiChoice’s business, including discontinuing the loss-making video streaming service Showmax and ending its sponsorship of the DStv Delicious Festival.
Bank of America also interacted with several retail groups, including Shoprite, Dis-Chem and Clicks. The bank has attached a buy tag to Shoprite, Clicks and Foschini.
However, Bank of America attached an underperforming tag to Truworths, stating that while the retail group had much topline growth, there is limited detail on the initiatives.
The report says Shoprite is going from “strength to strength”, highlighting its financial services ambitions as a growth potential.
It said Shoprite’s moves indicate it is sensing an increased focus here given large market potential.
“The recent acquisition of R&A, a FinTech player in the informal market, speaks to this. [Shoprite is] also working on a banking offering, looking to partner with incumbents. We believe savings in interchange could be significant and could offer partners ultralow-cost card replacement in exchange (a big expense for banks).”
Shoprite last month announced it had bought R&A, making a foray into the highly contested point-of-sale sector, where the likes of Capitec, Nedbank and Pepkor have big exposure.
The R&A transaction particularly gives Shoprite a foothold in the informal market, including spaza shops and other informal merchants in townships and peri-urban areas.
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