Multichoice rejects Canal+ $1.7 billion takeover bid citing undervaluation

African media and streaming giant, Multichoice has rejected a takeover bid from French media giant, Canal+. In its rejection note, the company’s board of directors said the offer price significantly undervalues the company and its future prospects.

Canal+, a major shareholder of Multichoice, has been in talks with the DSTV parent company for more than a year over a potential takeover bid. Last week, it submitted an official bid with the acquisition sum reportedly in the region of $1.7 billion dollars.

While making the bid, Chairman and CEO of Canal+, Maxime Saada said the purpose of the acquisition is to bring the strategy which the South African media company needs to continue thriving.

“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. Our Potential Offer, if successful, would be an important next step for MultiChoice to realise its full potential,” the CEO said.

In rejecting the bid, however, the South African media giant said the valuation excludes any potential synergies which may arise from the envisaged transaction. It said that after lengthy discussions, Canal+ has repeatedly conveyed to the public what it sees as the advantages of the combined entity. Therefore, the French media company’s view is that there are significant synergies. However, it failed to factor in those synergies in its offer and that omission makes the offer an unfair one.

“Therefore, while the Board is open to all means of maximising shareholder value, it has conveyed to Canal+ that – at this proposed price – the letter does not provide a basis for further engagement. Caution is accordingly no longer required to be exercised by shareholders when dealing in their securities,” the board said.

While it may have rejected the Canal+ offer, the board of directors noted that in keeping with its duty to act in the best interests of the Company, it remains open to engage with any party in respect of any offer which is for a fair price and is subject to appropriate conditions.

MultiChoice also confirmed that Canal+ has increased its shareholding in the company to 35.01% of its total ordinary shares in issue despite the rejection.

Multichoice rejects bid amid dwindling revenue

Multichoice, the parent company of DSTV has endured a torrid business landscape across Africa in recent times. Between April 1 and September 30, the company suffered a staggering after-tax loss of R911 million ($50.2 million) during the six months representing Q2 and Q3 of 2023. This is a substantial downturn compared to the R55 million after-tax profit reported in the corresponding period of 2022.

Correspondingly, its shareholders lost $1.7 billion as the company’s share price continued to slump. The company also experienced a 1% decline in revenue, slipping from R28.7 billion to R28.3 billion. Operating profit followed suit, plummeting 22% from R6.2 billion to R4.8 billion.

In addition to these setbacks, MultiChoice’s free cash flow witnessed a significant drop, standing at R1.07 billion, reflecting a 40% decrease from the R1.8 billion reported in the previous year.

In December, the company’s Chief Financial Officer, Tim Jacobs revealed that the company is gearing up for what he called “inflationary price increases” expected to be effected in January. The CFO said this was due to mounting financial challenges as the company struggles to maintain a healthy balance sheet. According to him, inflation-level price increases for DStv are necessary to ensure sustainable growth and the continued delivery of high-quality content.

With these woes trailing the company, Canal+, having grown its investment to become the company’s largest shareholder, is looking to salvage its investment in the company. The media company believes that by combining both companies’ strengths, MultiChoice would have the resources to invest in scale, local African talent and stories, and best-in-class technology to allow it to grow in Africa and compete with the global streaming media giants.

“We are steadfast in our belief that MultiChoice could enjoy a bright future as part of a combined group with Canal+,” the CEO, Maxime Saada had said.

See also: French media giant Canal+ submits bid to acquire DSTV parent company, Multichoice