Canal+ makes a bid to buy MultiChoice for more than R30bn

France’s entertainment giant Canal+, which bought a significant stake in MultiChoice in previous years, has approached the board of the local pay-television group with an offer to buy it out.

On Thursday 1 February, Canal+ confirmed that it is prepared to table an offer of R105 per MultiChoice share, which represents a 40% premium to the company’s closing price of R75 on 31 January 2024.

MultiChoice shares on the JSE shot up 25% in early trade on Thursday, inferring that the company’s shareholders are warming up to Canal+’s offer.

In recent years, Canal+ has been buying shares in MultiChoice, ending up with a shareholding of 31.67% by the end of March 2023, according to MultiChoice’s latest annual report. Canal+’s current ownership of MultiChoice is close to the 35% mark, which South Africa’s competition rules would require it to make a mandatory offer to minority shareholders to buy out the company. That Canal+’s ownership of MultiChoice is nowhere near 35% makes its planned buyout offer voluntary.

Daily Maverick calculates that Canal+ would shell out R31.7-billion for the remaining shares in MultiChoice that it does not already own. At Canal+’s offer of R105 per MultiChoice share, the French entertainment giant values MultiChoice at R46.5-billion.

In a JSE SENS announcement, MultiChoice confirmed receiving a letter from Canal+, indicating its plans to buy out the company. It also confirmed the R105 per share offer that Canal+ is willing to pay. MultiChoice said its board will update shareholders if there are any further developments."

Once the MultiChoice board is open to buyout talks, Canal+ said it would conduct a due diligence process into the affairs of the pay television company and submit a firm buyout to the board. “At this stage, there can be no certainty about the progression of the potential offer, nor the terms of any transaction that may occur,” Canal+ said in a statement.

Fraught regulatory approval processes 

Arguably, Canal+ will have to go through tough regulatory hurdles to get the deal over the line. Although South African broadcasting rules are open to a foreign entity (Canal+) investing in a local broadcasting company, the rules put a cap on ownership. Currently, foreign ownership of broadcasters is restricted to 20% of voting rights in a company, although its economic interest can be higher. This policy seeks to “ensure that South Africa’s broadcasting system continues to be owned and operated by South Africans,” a government policy paper reads. The government has proposed raising the limit from 20% to 49%, but nothing has come to fruition.

However, if the MultiChoice board is interested in Canal+’s advances, it might put forward a case to regulatory bodies for the deal to receive the green light.

Canal+ said the aim of buying MultiChoice would be to combine both businesses to create an entertainment giant. “It is the ambition of Canal+ to create an African media business with enhanced scale, which can thrive in a competitive international market, better serve its consumers with a world-leading offering of sports, local and global content, and ensure that Africa can tell her story to a global audience on her own terms.”

Canal+ said the media industry in which MultiChoice is operating “is becoming increasingly globalised and competitive, with regional media companies having to compete with the firepower of global media titans, with enormous resources to invest in content, marketing and technology. Scale is the only way to survive and thrive in this environment”.

Even Amazon Prime Video pulled out of South Africa due to a tough and competitive market.

Read more in Daily Maverick:  Amazon Prime Video’s restructuring will reverberate in SA through job losses and axed TV projects

Canal+’s advances towards MultiChoice come at a time when the latter is working with global broadcast groups to improve its content offering through its television businesses, DStv and Showmax. MultiChoice is working closely with global broadcasting group, Comcast, which owns NBCUniversal and the UK’s Sky, to relaunch Showmax and offer international content on its streaming service.

In addition to buying MultiChoice, Canal+ has other plans in South Africa. Canal+ said it is preparing for its own listing, adding that combining its operations with those of MultiChoice would benefit investors. “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.” DM