MultiChoice to move on with Canal+ R55bn deal despite regulatory hurdles

MultiChoice says it is going ahead with the acquisition deal by Canal+ despite regulatory concerns. CEO Calvo Mawela confirmed that the company is making steady progress on the proposed buyout by French media giant Canal+, with the deal expected to be finalized later this year.

Canal+ is making a bid to purchase the remaining MultiChoice shares at R125 per share. The French TV giant has been gradually increasing its stake in the South African company over the years, passing the 35% mark early in 2024. This, in turn, automatically triggered a mandatory offer for the acquisition of MultiChoice at about R55 billion.

Given that Canal+ now has a stake in the company worth over 45%, the final takeover is valued at around R30 billion in cash. The deal, however, faces significant regulatory hurdles, primarily the foreign ownership laws of South Africa. The Electronic Communications Act (ECA) imposes a cap on foreign firms having over 20% stake in local broadcasting services.

To address these legal problems, MultiChoice has issued a new corporate structure. Under this offer, there is to be a distinct company, LicenceCo, that will hold the company’s broadcast license in South Africa and manage subscriptions. LicenceCo will be owned primarily by historically disadvantaged South Africans, such as:

Phuthuma Nathi, with an economic interest of 27%. Black-owned investment firms Identity Partners Itai Consortium and Afrifund Consortium. A Workers’ Trust (ESOP).

MultiChoice itself will have a 49% economic interest in LicenceCo but will limit its voting rights to 20% to comply with ECA. The holding company will also keep a 75% stake in MultiChoice South Africa, apart from LicenceCo, and Phuthuma Nathi will keep the remaining 25%.

Both the Competition Commission and the Independent Communications Authority of South Africa (ICASA) are considering the proposed acquisition and MultiChoice’s restructuring proposals. Their decision will determine the fate of the Canal+ takeover.

Canal+ and Multichoice deal long in the making

The restructuring proposal comes after months of strategic moves by both companies.

Recently, MultiChoice officially stated that it would demerge its South African division into an independent business, LicenceCo, in an effort to comply with local ownership requirements. The group informed shareholders that MultiChoice (Pty) Ltd, the South African broadcast license holder and owner of local subscribers, would be demerged from the MultiChoice Group.

In a joint statement, Canal+ and MultiChoice highlighted that this shake-up was necessary to bring the broadcasters into line with the ECA, which caps foreign ownership within the broadcasting sector. If regulators endorse it, the new investors in LicenceCo will include former Telkom CEO Sipho Maseko’s Afrifund Investments and businesswoman Sonja de Bruyn’s Identity Partners.

“MultiChoice Group will be restructured so that the current holder of the broadcasting licence in South Africa and the entity that contracts with South African subscribers, MultiChoice (Pty) Ltd, will be carved out of the Group and will become an independent entity. The remainder of the group’s video entertainment assets will remain part of the Group,” the statement reads.

 In 2024, Canal+ had already acquired the largest share in MultiChoice by buying an additional 3.65 million shares, increasing its share to 40.83%. The French media company had been acquiring MultiChoice shares on the open market stealthily, a sign that it was determined to acquire full ownership of the firm in the long run.

Canal+ initially showed interest in MultiChoice back in 2020 when it wanted to create a pan-African broadcasting giant by combining its dominance over French-speaking Africa with that of MultiChoice over English-speaking Africa. The company has insisted that the acquisition would allow it to challenge big international players in the media and entertainment industry.

However, the takeover bid is being challenged in the law. After Canal+’s shareholding exceeded 20%, there were apprehensions of whether the company was violating the ECA. To allay this, MultiChoice assured shareholders that its Memorandum of Incorporation (MOI) made provisions to limit foreign voting rights to 20%.

Despite all these setbacks, Canal+ has continued to keep on acquiring shares aggressively as negotiations for the buyout are ongoing. All eyes are on this organizational restructure, the regulatory process and its implications for MultiChoice subscribers and the broader industry.