Canal+ bid for MultiChoice sets up regulatory showdown
The battle for MultiChoice has taken a dramatic turn. Canal+ has raised its offer for Africa s largest pay-TV operator to R125 per share, valuing the firm at about R55bn. The new all-cash offer, which is 19% higher than the previous bid, will see both companies enter exclusive talks on the deal.
Canal+ has said the offer was fair and attractive for MultiChoice shareholders and customers, who would benefit from its global expertise and content. MultiChoice has not yet accepted the new offer but it has undertaken not to engage with other potential bidders. To be sure, MultiChoice may still reject it based on the opinion and recommendation of its independent expert.
Still, the fate of the offer may not hinge on the preferences of the parties involved but rather on the actions of two regulatory bodies: the Independent Communications Authority of SA (Icasa) and the Takeover Regulation Panel (TRP). The two entities have different mandates and powers and may not see eye to eye on how to deal with Canal+’s offer.
As part of its mandate, Icasa must ensure commercial broadcasters such as MultiChoice comply with the Electronic Communications Act (ECA), which imposes conditions on their licences in the public interest. One of these conditions is the foreign control restriction, which limits the ability of foreigners to directly or indirectly exercise control over or have a financial interest in a commercial broadcasting licensee above 20%.
Canal+, as a foreign company, is subject to this restriction. It has been building its stake in MultiChoice for the past few years, reaching the 35% threshold that triggered the mandatory offer a few weeks ago. But it had contended to the TRP — which regulates mergers & acquisitions involving regulated companies such as MultiChoice — that it was not obliged to make a mandatory offer to other shareholders as
MultiChoice’s memorandum of incorporation (MOI) scales back its voting rights to 20%.
Days before Canal+ sweetened its offer, the TRP ruled that Canal+ had acquired over 35% of the voting rights in MultiChoice and, accordingly, a mandatory offer in terms of SA’s corporate law had been triggered. The TRP ordered Canal+ to make the mandatory offer, rejecting its arguments that MultiChoice’s MOI limits its voting rights to 20%, and stated that the MOI must be interpreted per the Companies Act, which does not allow for such a limitation.
In its ruling, the TRP made a distinction between MultiChoice Group, which Canal+ wants to buy, and MultiChoice SA, which holds the actual broadcast licences in the country, not withstanding the “direct or indirect” control highlighted by the ECA.
THE TWO ENTITIES HAVE DIFFERENT MANDATES AND POWERS AND MAY NOT SEE EYE TO EYE ON HOW TO DEAL WITH THE OFFER
The TRP’s ruling puts it on a collision course with Icasa, which may have a different view on the interpretation and application of the MOI and the ECA. Icasa, which has not commented publicly on the matter, may impose conditions or restrictions on Canal+ or MultiChoice.
Canal+’s offer has the potential to expose a regulatory clash between Icasa and the TRP which may have farreaching consequences for the broadcasting industry and the corporate sector in SA. The question is whether these two regulators can work together to find common ground or whether they will end up in a battle that will prolong the uncertainty and confusion for MultiChoice shareholders.