MultiChoice Group and its suitor Canal+ have proposed to restructure the South African-based video entertainment firm after the anticipated R30 billion acquisition deal with the French media giant goes through.
Last year, Canal+ made a mandatory offer to acquire the MultiChoice shares it does not own, for a consideration of R125 per share.
Since the offer was announced, the companies have been in talks with South African regulators, which have to approve the deal.
The companies were assessing and finalising suitable structuring options and potential transactions, which may be undertaken by the MultiChoice Group, on or shortly before the closing date, to ensure compliance with the applicable limitations on foreign control, while also maintaining MultiChoice’s broad-based black economic empowerment (BBBEE) credentials.
Today, a joint statement informed shareholders that discussions regarding the intended post-transaction structure of MultiChoice have been concluded.
The firms say they engaged with the board of directors of Phuthuma Nathi, MultiChoice’s BBBEE 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.
According to Canal+ and MultiChoice, these developments mark further important steps forward in the transaction process.
Post-transaction structure key features
The companies note the MultiChoice Group, Africa’s biggest pay-TV operator, will be restructured so that the current holder of the broadcasting licence in South Africa and the entity which contracts with South African subscribers, MultiChoice (LicenceCo), will be carved out of the MultiChoice Group and become an independent entity.
The remainder of the group’s video entertainment assets will remain part of the MultiChoice Group, they add.
LicenceCo will continue to hold the subscription broadcasting licence in South Africa. It will continue to contract with MultiChoice’s South African subscribers.
The entity will be majority owned by historically disadvantaged persons (HDPs) – Phuthuma Nathi, which will ultimately hold a 27% economic interest in LicenceCo; two well-established black-owned and managed companies, Identity Partners Itai Consortium and Afrifund Consortium; and Workers' Trust.
MultiChoice Group’s shareholding in LicenceCo will ultimately give it a 49% economic interest and 20% share of voting rights.
MultiChoice Group will also retain its existing 75% direct interest in MultiChoice South Africa, which will exclude LicenceCo.
Phuthuma Nathi will similarly retain its existing 25% interest in MultiChoice South Africa.
LicenceCo will enter into various commercial agreements with MultiChoice Group subsidiaries in relation to 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.
They add 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.”
Canal+ and MultiChoice are confident the envisaged structure meets the requirements of all applicable laws, including the restrictions on foreign ownership and control of broadcasting licences contained in the Electronic Communications Act, 2005.
According to the firms, the LicenceCo structure was submitted to the South African Competition Commission, as part of the filings made on 30 September 2024, and is being considered by the commission.
The structure will, along with the attendant shareholder transactions, be finalised in due course upon receiving the necessary approval of the relevant authorities, they add.
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.
Increased competition
Maxime Saada, CEO of Canal+, says: “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.
“I am confident the contemplated post-transaction structure will comply with SA's laws and regulations. Canal+ has placed broad-based black economic empowerment at the heart of the transaction and is delighted to welcome in this potential structure, alongside Phuthuma Nathi, new HDP shareholders and broadened employee ownership.
“We remain committed to deliver on our ambition to bring MultiChoice and Canal+ together, with today's announcement representing another step forward.”
Calvo Mawela, CEO of MultiChoice Group, says: “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.
“MultiChoice has a long and proud history of creating significant value for the shareholders of Phuthuma Nathi, one of the most successful BBBEE schemes in South Africa.
“To continue this journey with Phuthuma Nathi, while at the same time broadening the BBBEE participation in our business through new partnerships that also involves our staff, is an inspiring prospect.”
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