French media conglomerate Groupe Canal+ has made a non-binding takeover offer to South African PayTV company MultiChoice Group Ltd, as confirmed by the South African company last Thursday.

Canal+ (or its parent company Vivendi) already holds 31.67% of MultiChoice shares and is offering 105 South African Rand (ZAR) in cash per share for the remaining papers. The non-binding offer includes a takeover premium of 40% based on the closing price of MultiChoice shares on January 31, 2024, the last trading day before the announcement of the takeover offer.

Before delving into further details of Canal+’s unsolicited takeover offer, I would like to briefly introduce the two media companies.

The companies involved in a nutshell The MultiChoice Group Limited was founded in 1995 and is headquartered in Randburg, South Africa (20 km northwest of Johannesburg). The media conglomerate is, according to its own statements, Africa’s leading entertainment platform.

With its brands SuperSport (PayTV sports channel), DStv (video streaming service), GOtv (a digital terrestrial television platform), Showmax (an internet-based subscription video-on-demand service), the company offers PayTV services in many African countries.

In addition, MultiChoice offers IT solutions, an emergency app, and a sports betting and gaming platform under the brand BetKing. The products and services of the MultiChoice Group are used by over 23.5 million households in 50 African countries south of the Sahara.

In the financial year 2023, which ended on March 30, 2023, the approximately 7,100 employees of the South African PayTV company generated sales of 59.1 billion ZAR (approximately 2.9 billion euros). Operating profit (EBIT) was just under 2.38 billion ZAR (approximately 120 million euros).

Groupe Canal+ is a 100% subsidiary of the French media conglomerate Vivendi.

The company is one of the largest European pay-TV providers and market leader in France. Canal+ is also active in Asia and Africa. In Africa, the French company has around 8 million customers.

Vivendi, the parent company of Groupe Canal+, is currently considering the possibility of splitting into several companies, each of which is to be listed on the stock exchange. Canal+ is actively preparing for its listing after the announcement of the separation by the parent company Vivendi. According to the company, a listing in South Africa is also conceivable.

The offer in detail According to Bloomberg’s calculations, Canal+’s offer values MultiChoice at 46 billion ZAR (approximately 2.26 billion euros). This is significantly above MultiChoice’s market value, which was 38.7 billion ZAR (approximately 1.9 billion euros) on February 2, 2024.

Through a possible takeover of MultiChoice, Canal+ wants to further expand its position on the African continent. So far, Canal+ has been predominantly present in the French-speaking countries in West Africa.

By acquiring MultiChoice, the French pay-TV provider would significantly expand its reach in the English-speaking countries in East Africa.

How the stock market reacted After the unsolicited takeover offer became known, MultiChoice’s share price rose by 26.6% to 94.95 ZAR at the Johannesburg Stock Exchange last Thursday (February 1, 2024). However, it remained well below the 105 ZAR that Canal+ had informally offered.

Investors reacted cautiously because Canal+’s offer is not yet official or binding. In addition, South African laws virtually exclude takeovers of local media companies by foreign companies.

The Vivendi share price lost 1.4% at the Paris Stock Exchange and closed at 10.30 euros on Thursday.

MultiChoice rejects offer – Canal+ increases stake Early Monday morning (February 5, 2024), MultiChoice’s board of directors announced in a brief press release that they were rejecting Canal+’s offer. The offer of 105 ZAR per share is significantly below the company’s actual value.

At the same time, the South African PayTV provider expressed openness to further negotiations with „any party“ – including other interested parties – based on a fair offer price.

At the same time, Canal+ announced this morning that it had increased its stake in the South African competitor to 35.01%. MultiChoice subsequently applied to the South African Takeover Regulation Panel for a decision on whether Canal+ is obliged to make a binding takeover offer to MultiChoice shareholders.

What’s next in store for MultiChoice? It is completely uncertain what will happen next in the takeover poker for MultiChoice. It is conceivable, for example, that Canal+ will improve its offer. Alternatively, offers from other interested parties, such as US cable provider Comcast, with whom MultiChoice already cooperates in other ways, are also possible.

It is also possible that Canal+ will be obliged to make a mandatory offer to MultiChoice shareholders if the South African Takeover Regulation Panel makes a corresponding decision. However, South African laws are very restrictive when it comes to foreign companies taking over local media companies.