Does Canal+’s Share Sweep Put MultiChoice Under Pressure to Complete Deal?

Canal+, the French pan-African broadcaster, continues to buy millions of MultiChoice shares in the open market. Today, the company announced an acquisition of a tranche of almost 5 million shares in the past week, bringing its stake to 43.5%.

The two broadcasters are currently in negotiations for an acquisition deal which valued MultiChoice at $1.3 billion.

But Canal+ might end up paying much less than the $1.3 billion for the pan-African broadcaster with 22 million subscribers. In the last three weeks, the company has purchased over 12 million MultiChoice shares at an average price of R117 per share. This is a discount on the R125 per share mandatory offer that MultiChoice accepted in April.

As Canal+ continues to buy the shares, analysts say it is saving the money it would have paid for the acquisition of outstanding MultiChoice shares at the R125 per share mandatory offer price. According to Jimmy Moyaha, co-founder of investment firm Lebowa Capital, because the conditions of the mandatory offer agreement do not bar Canal+ from buying the shares, they are fair play. “The shares acquired over the last few weeks would have cost Canal+ more if they were purchased at the offer price so they saved significant capital,” said Moyaha.

So does this put any pressure on  MultiChoice to complete the deal? The broadcaster has already had to extend ex-board chair Imtiaz Patel’s tenure to advise on the deal and has also reportedly roped in Patrice Motsepe to traverse through the deal’s regulatory requirements. There is also the board MultiChoice has formed to advise on the deal. According to Tshepo Magagane, a markets analyst, Canal+ know that it has to reach a certain level of ownership that would allow it to say,  "See, your shareholders are willing to sell at this price."

The market continuing to trade MultiChoice shares at a discount to the offer price also does MultiChoice no favours. The discount, albeit at 6%, is perhaps an indication of the market reservations about the two broadcasters seeing the deal through. Both the circumstances– Canal+ sweeping up shares and the shares trading at a discount to the offer price– are a double whammy for MultiChoice as it means the company is being picked apart for the cheap.

According to Mpumi Ndiweni, CEO of advisory and investing firm Colmin Group, Canal+’s play is to force a regulatory intervention that would determine what will be considered a reasonable offer. “This will put pressure on MultiChoice as the price will now be determined by an independent third party and may come off lower than what they are pushing for,” Ndiweni said. Following Canal+’s mandatory offer, at least 90% of MultiChoice shareholders have to agree with it before a deal can proceed. The deadline for this, set by the Takeover Regulation Panel (TRP), is 4 June.

With reports in local media stating that most MultiChoice shareholders are looking forward to selling their shares, which fell by almost 50% last year, it seems like the company might be delaying the inevitable. When the June 4 deadline comes and the R125 offer is accepted, the broadcaster would have been bought for the cheap by Canal+, perhaps a checkmate move for the French broadcaster.

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