Canal+ bid tests rules on media ownership
• French group says it has a way around MultiChoice voting limits
French entertainment giant Canal+ has made a buyout offer for MultiChoice in a R46bn deal that will test SA’s and the de facto African pay-TV monopoly’s own rules on foreign ownership and control of the media.
Canal+, which was recently spun out of one of the world’s biggest media conglomerates, Vivendi, pitched the transaction as an opportunity to create an African media business powerhouse with operations in key markets on the continent, from SA and Nigeria to Senegal and Cameroon.
Still, the transaction could face regulatory and internal pushback because SA’s regulations — under the Independent Communications Authority of SA (Icasa) and MultiChoice’s own memorandum of understanding — limit foreign voting rights to 20%.
EXPERTS
If Canal+ fails to pass these hurdles, the strategic logic of the deal would be thrown into serious doubt as it would mean it would own 100% of a business in which it had a limited say.
But the French group downplayed these concerns, saying it has found a way around local legislation that limits control of media businesses by foreign companies.
“We’ve been investing in this company for more than three years now. As you can imagine, we identified this [issue] and have engaged a number of experts to get their take on solutions to this; otherwise we wouldn’t have made the offer,” chair and CEO of Canal+
Maxime Saada told Business Day in an interview. “I cannot say any more than that but we have identified solutions.”
The deal comes a year or so after MultiChoice bolstered its senior management team with officials who have regulatory and competition law expertise. It counts Keabetswe Modimoeng, former chair of Icasa, as its head of corporate affairs and stakeholder relations; and Steven Budlender, a respected competition law expert, as its group legal counsel.
The Electronic Communications Act limits the control or financial interest that a foreigner can have over a commercial broadcasting licensee.
The restrictions on influence and control, as opposed to actual ownership, explain how Canal+ has been able to buy up such a large stake without contentious issues arising.
In terms of the all-cash deal, Canal+ (which already owns about a third of MultiChoice) has offered R105 per share, a 40%
premium to the last session’s closing price and valuing the company at about R46bn.
In reaction, shares in MultiChoice skyrocketed, well over R12bn to its market cap for their biggest one-day gain since MultiChoice was hived off and separately listed on the JSE by Naspers four years ago.
The stock ended 26.6% stronger at R94.95 on Thursday, slightly below the offer price.
For some time, investors in MultiChoice had been concerned and speculated about the intentions of deep-pocketed Canal+, which has been aggressively buying up shares since 2020. Canal+ started building its stake with an initial purchase of 6.5%. It currently owns 33.06% of MultiChoice, not far from the 35% mark that would trigger a mandatory offer to minorities under SA’s takeover rules.
The French operator is preparing for its own listing and says a combination with MultiChoice would provide more opportunity to benefit investors.
“Our ultimate goal being to also obtain a listing in SA,” said Canal+.
Analysts agree that the deal makes strategic sense to scale MultiChoice’s operation and it offers investors a chance to get cash.
Philip Short, a senior equity analyst at Flagship Asset Management, said: “Competition is intensifying globally in the media industry, especially in streaming. Africa’s infrastructure lags developed markets’ with regard to fibre or fixed wireless, but will catch up quickly. Once established, the satellite advantage MultiChoice has becomes obsolete, to a large extent.”
Canal+ says its ambition is 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”.
Peter Takaendesa, head of equities at Mergence Investment Managers, says it is difficult to assess claims of future prospects in an industry that is going through major structural changes, such as global media.
“There is still no guarantee of success but it would, if concluded, give them a solid foundation in addition to the Comcast partnership in streaming.”
MultiChoice's new Showmax group is 70% owned by MultiChoice and 30% by Comcastowned NBCUniversal.
Saada said: “Canal+ is a longterm investor in both MultiChoice and SA, and is proud to have been actively involved in Africa’s media sector for 30 years. For MultiChoice to continue to thrive in Africa, it will require a strategy that enhances its scale as well as strengthens local and global expertise.”