MultiChoice Accepts Canal+’s $1.9 billion Offer

MultiChoice has reached a deal with Canal+ which will see the French broadcaster pay R125 for each share of MultiChoice. This represents a 66% premium on MultiChoice’s share price when the first offer was made in February and will see Canal+ pay $400 million more than its initial offer of R105 per share. The agreement paves the way for Canal+ to offer to wholly acquire MultiChoice.

According to a joint statement by the two companies, a combined group would be better positioned to address key structural challenges and opportunities resulting from the progressive digitalisation and globalisation of the media and entertainment sector. “Together, Canal+ and MultiChoice would form a global entertainment business with Africa at its heart,” they said.

As part of the agreement, MultiChoice has granted exclusivity to Canal+ for the acquisition and will not entertain other offers unless at a higher price than Canal+. Should MultiChoice receive such an offer, it agrees to allow Canal+ time to counter it. Despite the progress so far, the deal still faces significant regulatory hurdles which, if both companies fail to address them, might prevent the deal from going through.

Canal+ initially made the R125 per share offer on March 5, following a ruling by South Africa’s takeover regulator that the broadcaster make a mandatory offer to shareholders. This followed Canal+ surpassing the 35% shareholding mark which by South African law, evokes a mandatory offer to be made to shareholders. Canal+ had initially offered R105 per share for the shares, an offer MultiChoice quickly rebuffed saying it undervalued the company.

To fund the transaction, Canal+ has secured a bank guarantee from JPMorgan Chase Bank to provide a maximum funding of R35 billion for the transaction. This is in line with South Africa’s regulatory requirements that acquirers provide an alternative guaranteed capital source which the regulator will exercise to pay off shareholders furnished with the mandatory offer should the acquirer fail to do so. MultiChoice on the other hand has set up an independent board to see through the transaction with South Africa’s largest bank, Standard Bank, roped in as lead financial advisor.

This latest development is perhaps the strongest indication that the transaction might be nearing completion, albeit still having major outstanding issues. The main one of these issues is the regulatory requirements regarding ownership of broadcasters in South Africa. 

One of these stipulates that Canal+, being a foreign company, will not be able to have more than 20% voting rights in MultiChoice even if it honours the mandatory offer and buys all outstanding shares of the pan-African broadcaster. Another one stipulates that the entity which acquires MultiChoice must have at least 30% black economic empowerment shareholding.

Canal+, in this latest announcement, stated that it intends to abide by these regulatory requirements. This means that the company will most likely create a holding company whose ownership structure satisfies the requirements. With billionaire Patrice Motsepe rumoured to be in talks with Canal+’s bid for MultiChoice, he will likely resume significant ownership of the company.

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