Canal+ buyout offer rebuffed as too low
MultiChoice may have to disclose its internal valuation or plans to unlock value after rejecting a buyout offer well above its current market value.
Canal+ crossed an ownership threshold in the group that could trigger an offer to other shareholders for their stakes in the company. The French group has been building its stake in MultiChoice since 2020 and it is now at 35% from 32% last week.
On Monday, the DStv operator said it rejected a buyout offer from Canal+, saying the proposed offer price of R105 a share in cash significantly undervalues the group and its future prospects. However, the company still left the door open for further negotiations if Canal+ decided to sweeten its offer price, which values MultiChoice at R46bn.
In a short statement on Monday, MultiChoice said it rebuffed the proposal after careful consideration and after it conducted its own valuation exercise.
Market players will be keenly watching to see if the French group takes the bait and raises its offer.
The current offer price is a 40% premium to MultiChoice’s closing price on January 31.
The move has prompted questions about the valuation of Africa’s largest pay-TV company. Given the downward trajectory of the group’s shares through 2023, in which it hit a record low in November, the question is whether Canal+ made a fair offer or simply took advantage of a business undervalued by the market.
The average target price of investment analysts and brokers covering MultiChoice is R105 a share — in line with the French group’s offer.
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Data from Infront Analytics shows a target range of between R70 and R104.50 a share, with the median being R87.25.
Canal+ 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.
Philip Short, portfolio manager at Flagship Asset Management, said the market “appears to value the group at R75, given that’s where it was trading before the offer, and one could argue the market has already discounted MultiChoice’s future prospects.
“As things stand today at MultiChoice, the outlook is not as rosy as when they were unbundled by Naspers. Foreign exchange [rates] of the African countries where they operate have moved against them significantly, as has foreign exchange controls, and the consumer in SA and elsewhere is weaker.
“MultiChoice should have a very clear way to extract value from their products and services because if the deal is rejected on MultiChoice holding out for a better offer, and the share price is lower one or two years later, you can expect rather heated AGMs at MultiChoice head office in future.”
MultiChoice has had its ups and downs since its unbundling from Naspers, but that trend has generally been negative, with the
worst of this seen in 2023. From a record high of R155.20 in March 2023, the stock plunged to a low of R62.31 in November, just after the company reported interim earnings to September.
The stock is currently trading 8.42% lower than its March 2019 debut on the JSE.
With Canal+ having beefed up its shareholding in MultiChoice to 35%, MultiChoice has asked the Takeover Regulation Panel to make a ruling about whether a mandatory offer must be made to all holders of ordinary shares in the company under section 123 of the Companies Act.
In terms of financial performance, the group reported a headline loss position in November, blamed mostly on weaker currencies and increased investment in Showmax’s revamp.
Subscriber numbers at the group decreased 2% to 21.7-million, due mainly to power cuts in SA and the removal of nonpaying customers. The base of its SA business, which accounts for 40% of customers, fell 5% to 8.6million, though premium subscribers grew 5% “reflecting a positive trend for the first time in many years”.
The rest of Africa base grew 1% to 13-million, despite the effect of weaker local currencies and consumer pressure.