MultiChoice to restructure after Canal+ acquisitionMultiChoice to restructure after Canal+ acquisition

To facilitate the acquisition of South African-headquartered MultiChoice Group by French pay-TV company Canal+, the two companies have proposed restructuring options to ensure compliance with South African regulations.

The restructuring will allow Canal+ to complete its acquisition of MultiChoice while complying with South Africa's Electronic Communications Act, which forbids foreign companies from holding more than 20% of the voting rights of a South African broadcaster.

In February 2024, South Africa's Takeover Regulation Panel ruled that Canal+ had to make a mandatory offer to MultiChoice's minority shareholders to buy out the company, after acquiring more than 35% of the company on the open market.

In June 2024, an independent board – set up by MultiChoice and reviewed by Standard Bank – found that Canal+'s 125 South African rand (US$6.70) per share offer was "fair and reasonable" to MultiChoice shareholders.

This week, in a statement issued via the Johannesburg Stock Exchange (JSE), the two companies told shareholders that the discussions regarding the intended post-transaction structure of MultiChoice had been concluded.

"Canal+ and MultiChoice have engaged with the Board of Directors of Phuthuma Nathi [MultiChoice's empowerment scheme], which has given in-principle support for the transaction. An Independent Board of Phuthuma Nathi will be constituted to review and consider the necessary formal proposals in accordance with the relevant regulations," the statement explained.

Related:Canal+ edges closer to MultiChoice takeover

Restructuring process

As per the statement, the MultiChoice Group will be restructured so that the current holder of the broadcasting license in South Africa and the entity which contracts with South African subscribers, MultiChoice (Pty) Ltd (referred to as Licence Co), will be carved out of the MultiChoice Group and will become an independent entity.

The remainder of the group's video entertainment assets remain part of the MultiChoice Group.

"LicenceCo will continue to hold the subscription broadcasting license in South Africa. It will continue to contract with MultiChoice's South African subscribers. It will be majority owned by historically disadvantaged persons," the two companies explained.

The Phuthuma Nathi empowerment scheme will ultimately hold a 27% economic interest in the South African entity.

Two black-owned and managed companies – the Identity Partners Itai Consortium founded by Sonja de Bruyn and Afrifund Consortium which was founded by former Telkom SA Group CEO Sipho Maseko – will also invest in the business. 

Related:Independent board approves Canal+ offer for MultiChoice

Afrifund Consortium Founder and former Telkom SA Group CEO Sipho Maseko. (Source: Telkom SA)

A Workers' Trust (ESOP) will be established to benefit employees and further promote inclusive ownership.

MultiChoice Group, which Canal+ plans to acquire, will retain a 49% economic interest in the South African license holder and a 20% share of the voting rights, allowing the French company to comply with legislation.

According to the two companies, LicenceCo will enter into various commercial agreements with MultiChoice Group subsidiaries concerning the services currently provided to LicenceCo by other MultiChoice Group entities.

"These relate to, among others, the provision of content, technology, subscriber management, and support and other functions," the companies continued.

MultiChoice added that the transaction will not lead to any disruption for LicenceCo's South African viewers, who will continue to access its services as normal.

"In time those subscribers will benefit from the additional content and technology investments envisaged by the MultiChoice Group, in its capacity as supplier to LicenceCo," the statement continued.

"Canal+ and MultiChoice are confident that the envisaged structure meets the requirements of all applicable laws, including the restrictions on foreign ownership and control of broadcasting licenses contained in the Electronic Communications Act, 2005," the companies said.

Complying with regulation

The companies said the LicenceCo structure was submitted to the South African Competition Commission as part of the filings made on September 30, 2024, and is being considered by the Commission.

"The transaction remains subject to regulatory review across numerous jurisdictions, including South Africa. It will also be assessed by the Independent Board of Phuthuma Nathi, following the in-principle support given by the Phuthuma Nathi Board to the proposed transaction," the statement continued.

The restructuring will allow Canal+ to complete its acquisition of MultiChoice while complying with South Africa's Electronic Communications Act. (Source: Image by Freepik)

Canal+ CEO Maxime Saada said he is confident the contemplated post-transaction structure will comply with SA's laws and regulations.

"This transaction is an opportunity to create a unique global media company, with a strong presence across Africa, with the scale, expertise and creativity to compete and partner with the largest players within the media sector and beyond," Saada explained.

Acquisition genesis

The love affair between MultiChoice Group and Canal+ began when the French company offered R105 ($5.50 at the time) per MultiChoice ordinary share – which represented a 40% premium on MultiChoice's closing share price on the JSE of R75 ($3.13 at the time) on January 31, 2024.

MultiChoice, however, believed the offer significantly undervalued the company and rejected it.

That led to Canal+ making a mandatory offer to MultiChoice shareholders in March 2024 to take up all the shares that it did not already own.

In April 2024, Canal+ increased its shareholding to 40.1%. A week later, it raised it further to 40.83%, and by May 2024, the company held 45.2% of MultiChoice.

"We are very pleased about the progress that has been made in relation to this transaction. In a fast-evolving industry that is becoming increasingly competitive, the opportunity to combine our efforts to increase scale and bring our subscribers an even better offering is something that continues to excite us," said MultiChoice Group CEO Calvo Mawela.