The independent board set up by MultiChoice to assess Canal+’s bid to take control of the company has recommended the French pay TV giant’s all-cash mandatory offer.
The board said that the term of the offer are fair and reasonable. Canal+ is offering ZAR125 per share for those shares in the company that it does not already own in a deal that would value the South African pay TV operator at about ZAR55 billion (US$3 billion).
The pair have now distributed their ‘combined circular’ to shareholders, with Canal+’s offer set to open at 09:00 local time tomorrow.
Canal+ currently owns about 45% of MultiChoice after making a series of purchases following the pair’s agreement on the outline of the takeover in principle.
Ownership restriction
With the takeover now likely, Canal+ is left with the problem that South African regulations prevent foreign entities from exercising voting rights above a 20% threshold on holders of commercial broadcast licences.
This restriction does not prevent MultiChoice from taking control of MultiChoice – indeed the interpretation of the rules by the country’s Takeover Regulation Panel forced Canal+ to make a mandatory offer in the first place once it crossed the threshold of 35% ownership – but it does put a stop to “the ability of a foreigner to exercise control over and have an interest in the holder of a commercial broadcasting service licence above a 20% threshold”, in the TRP’s words.
While Canal+ could still exercise voting rights on “other (non-licensee) matters”, that 20% rule would be highly restrictive. The licensed entities within MultiChoice Group include MultiChoice South Africa, MultiChoice Africa, premium rights holder M-Net and sports broadcaster SuperSport.
That leaves out only support functions and the advertising sales side of the business plus technology outfit Irdeto, production arm MultiChoice Studios and streamer Showmax – the latter being a JV with Comcast’s NBCUniversal, which holds a minority stake.
The time-span for acceptance of the offer is long – it is not set to close until April next year, giving Canal+ time to come up with a solution. Canal+ has said it will also respect MultiChoice’s commitment to building its business with social transformation in South Africa in mind through fostering Broad-Based Black Economic Empowerment (BBBEE) initiatives.
Structuring options
The pay TV operator said it and MultiChoice were “in the process of 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 BBBEE credentials.”
These could include a “corporate reorganisation of the MultiChoice Group” and/or “the participation of one or more local BBBEE partners” and/or “mechanisms to limit the voting rights of foreigners and/or to limit MultiChoice’s voting rights over the licensed entities in the MultiChoice Group”.
– Stuart Thomson
