French media giant Canal+ has proposed to acquire Multichoice, the South African parent company of DSTV. This development was revealed in a statement released on Thursday, which has been reported by numerous media outlets. Canal+, which is already a significant shareholder in Multichoice, has confirmed that it has approached the Board of Directors of MultiChoice with a letter of intent.
The letter reportedly contains a non-binding indicative offer from Canal+ for the acquisition of all the issued ordinary shares of Multichoice that are not currently owned by Canal+. Maxime Saada, the Chairman and CEO of Canal+, stated that the acquisition aims to provide the necessary strategy for Multichoice to continue its growth and success in Africa.
Saada emphasized the need for a strategy that not only increases Multichoice’s scale but also enhances its expertise both locally and globally. “Our potential offer, if accepted, would mark a significant milestone for Multichoice in realizing its full potential,” he remarked.
The statement from Canal+ highlighted that its proposal to acquire Multichoice is contingent upon receiving the requisite regulatory clearances.
“Pending specific confirmations that Canal+ anticipates after more discussions with MultiChoice, Canal+ is considering an offer amounting to a cash payment of R105 per MultiChoice ordinary share. This proposed price would constitute a 40% premium over MultiChoice’s closing share price of R75 as of 31 January 2024,” the statement detailed.
Is Canal+ the answer to Multichoice’s woes?
Multichoice, the parent entity of DSTV, has faced significant challenges in the African market recently. During the six months spanning April 1 to September 30, the company recorded a substantial after-tax loss of R911 million ($50.2 million), covering the second and third quarters of 2023. This marks a drastic decline from the R55 million after-tax profit seen in the same timeframe in 2022.
Additionally, its shareholders saw a notable decrease in value, with the company’s share price dropping significantly, leading to a $1.7 billion loss in market value. The company’s revenue also experienced a slight downturn, decreasing by 1% from R28.7 billion to R28.3 billion. Operating profit took a significant hit, dropping 22% from R6.2 billion to R4.8 billion.
Moreover, MultiChoice’s free cash flow suffered a considerable decline, ending at R1.07 billion, which is a 40% fall from the R1.8 billion reported in the prior year.
In December, Multichoice’s Chief Financial Officer, Tim Jacobs, announced plans for what he termed “inflationary price increases” set to take effect in January. Jacobs explained that these adjustments were necessary due to escalating financial pressures as the company endeavors to sustain a healthy balance sheet. He stated that aligning DStv’s prices with inflation levels is crucial for ensuring sustainable growth and the continued provision of high-quality content.
Amid these challenges, Canal+, which has increased its stake to become the largest shareholder in Multichoice, aims to protect and enhance its investment. The company is convinced that leveraging the combined strengths of both entities will equip Multichoice with the means to invest in expanding its scale, nurturing local African talent and stories, and adopting top-tier technology. This strategy is aimed at facilitating growth within Africa and enabling it to hold its own against the major global streaming services.
Maxime Saada, CEO of Canal+, expressed a strong conviction in the potential benefits of merging Multichoice with Canal+. “We are steadfast in our belief that MultiChoice could enjoy a bright future as part of a combined group with Canal+,” he stated.
Canal+ has also mentioned that, following the successful completion of confirmatory due diligence, it plans to issue a firm intention letter to the Independent Board. However, the company has cautioned that at this juncture, there is no guarantee regarding the advancement of the Potential Offer or the specifics of any resulting transaction.
However, Canal+ emphasized its commitment to adhering to all laws and regulations applicable to the South African media sector and companies listed on the Johannesburg Stock Exchange. The company assured that any firm intention letter it submits will be considerate of the obligations it would assume in this context.
The French media conglomerate also disclosed its active preparations for a stock market listing, following the unbundling from its parent company, Vivendi. Through this acquisition, should it proceed successfully, investors stand to gain from the synergies between Canal+ and Multichoice.
“Our ultimate goal is to secure a listing in South Africa,” stated Canal+.
