Canal+ Group is looking to take control of MultiChoice Group and is offering R105/share – a figure noted as being 40% above the current share price. Canal already owns 31.7% of MultiChoice and has progressively been increasing its shareholding in the sub-Saharan African media company. In September 2022 Canal+ increased its stake from 20.1% to 26.3% before raising that to 30.1% by February of 2023. TechCentral previously reported, that if Canal+’s share ownership went past 35% – they would have to trigger a mandatory offer to other shareholders. Indications are that the offer would be around R48bn rand (US$2.8bn currently).
“Subject to certain confirmations that Canal+ expects following further engagements with MultiChoice, Canal+ anticipates its offer to be for a cash consideration of R105 per MultiChoice ordinary share, which would represent a premium of 40% to MultiChoice’s closing share price of R75 on 31 January.”
Canal+ statement
Why offer more for the shares than they are worth?
The premium on the share price is probably meant to incentivise shareholders to approve the deal. If the offer is simply at the current market price, shareholders might not see enough benefit in selling their shares. The premium makes the offer more attractive and encourages them to vote in favor of the acquisition. That’s most likely what Canal+ intends here. Considering that acquiring a majority stake in a company often gives the buyer (Canal+) significant control over MultiChoice’s operations and strategic direction. This control can be valuable, even if the target company’s financial performance is not exceptional. The premium offer compensates shareholders for giving up this control.
Canal+ might also believe that MultiChoice’s stock is undervalued by the market and that its true potential is not being reflected in the current price. Offering a premium allows them to capture this hidden value.
Lastly and perhaps most interestingly as we will explore in a bit, Canal+’s bid might be meant to close out competitors from acquiring control in MultiChoice. If there are multiple companies interested in acquiring the target, a bidding war can erupt. To secure the deal, the acquirer might need to offer a higher premium than its competitors.
Is this deal – meant to close out Canal+ rival, Comcast?
MultiChoice was working closely with Canal+’s rival, Comcast. The timing of Canal+’s bid will certainly raise eyebrows. Earlier today news also broke revealing MultiChoice and Comcast would be investing US$177mn in Showmax during this financial year. The new version of Showmax expected to launch later this February is powered by Peacock’s technology & is expected to deliver content from Comcast brands such as NBC Universal, Sky, HBO and Warner Bros.
If that isn’t complicated enough – it’s important to remember that ShowMax ownership is currently divided between Comcast (30%) and MultiChoice (70%). This means Canal+ and direct rival Comcast all own parts of MultiChoice.
“MultiChoice Group (MultiChoice) (JSE: MCG) and Comcast’s (NASDAQ: CMCSA) NBCUniversal and Sky today announced a new partnership that will bring some of the world’s best content and technology to streaming customers across MultiChoice’s 50-market footprint in sub-Saharan Africa, at a time when Africa is approaching an inflection point in terms of broadband connectivity and affordability. The new Showmax group will be 70% owned by MultiChoice and 30% by NBCUniversal. It will build on Showmax’s success to date and aim to create the leading streaming service in Africa.” – Joint statement from MultiChoice and Comcast from March 2023
Part of the motivation behind Canal+’s latest bid might be a response to ensure that ComCast doesn’t take more control of the streaming business or to slow down partnership efforts between MultiChoice and ComCast.
A fortnight ago, MultiChoice CEO Calvo Mawela was asked by TechCentral whether he believed Comcast would increase their shareholding in Showmax to which he replied, “Absolutely! They decided to take 30% to start with, but who knows what the future holds?” The bid by Canal+ could be a play to ensure that no such thing happens. At the time, DStv CEO also described Canal+ as passive shareholders, something that might change if this bid goes through.
What is Canal+ saying about their bid?
Canal+ believes their bid will “create an African media business with enhanced scale, which can thrive in a competitive international market”. In their bid, they have also highlighted that the bid would allow.
Are there potential points of contention?
South Africa’s broadcasting legislation has been noted as being a potential stumbling block as there is a 20% limit on foreign ownership of South African broadcasters. It’s unclear if MultiChoice has been able to skirt this rule because of the nature of it’s continental service offering as DStv is not limited to just South Africa. So far that particular legislation hasn’t stopped Canal+ from previously raising the stake in the group – so it might not be an issue on this particular bid.
In their bid, Canal also indicates that they are open to listing in South Africa:
“Canal+ is actively preparing its listing following the unbundling announcement of its parent company Vivendi. This will allow investors to benefit from the combination of Canal+ and MultiChoice, our ultimate goal being to also obtain a listing in South Africa”
Canal+ presence in Africa
Presently, Canal+’s interests in Africa extend beyond their stake in MultiChoice. TechCabal reported that the broadcaster had 7 million subscribers in French-speaking Africa last September. There is potential for a consolidated service offering that will span between Canal+’s existing audiences and MultiChoice’s offering but that is unlikely given that it hasn’t been touted by the group and would require a considerable amount of work to achieve including rebranding on the part of either Canal Afrique or DStv. In the long-term, it can’t be ruled out though and could be what Canal+ are referring to when they mean that their bid offers MultiChoice more scale across the continent.
