Canal+'s MultiChoice Announces New Structure Should Acquisition Get Approval From Regulators

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In an effort to get the acquisition by France’s Groupe Canal+ of MultiChoice Group over the line, the South African broadcaster and parent of DStv and Showmax has announced a plan to carve out its South African licensee into a new entity.

The move is designed to allow Canal+ to proceed with the acquisition of MultiChoice without falling foul of the Electronic Communications Act, which prohibits foreign entities from owning more than 20% of a South African broadcasting licensee. If it gets the go-ahead from regulators, new investors in the South African licensee will include former Telkom CEO Sipho Maseko’s Afrifund Investments and businesswoman Sonja de Bruyn’s Identity Partners.

In a joint statement by MultiChoice and Canal+ on Tuesday, the two broadcasters expressed confidence that their proposal will be approved by South African regulators.

Canal+ is offering R125/share in cash for the JSE-listed broadcaster that owns DStv, Showmax and SuperSport.

“MultiChoice Group will be restructured so that the current holder of the broadcasting licence in South Africa and the entity that contracts with South African subscribers, MultiChoice (Pty) Ltd, will be carved out of MultiChoice Group and will become an independent entity… The remainder of the group’s video entertainment assets will remain part of MultiChoice Group,” Canal+ and MultiChoice said in their joint statement.

The South African broadcast licence holder, called LicenceCo, will “continue to hold the subscription broadcasting licence in South Africa” and will continue to “contract with MultiChoice’s South African subscribers”. It will be majority owned by “historically disadvantaged persons”.

New shareholders

MultiChoice’s empowerment scheme, Phuthuma Nathi, will ultimately hold a 27% economic interest in the South African entity, while two black-owned and -managed companies, the Identity Partners Itai Consortium and the Afrifund Consortium, will invest in the business. A workers’ trust will also be established. Afrifund Investments was founded and is led by former Telkom CEO Maseko, while Identity Partners is headed by De Bruyn. TechCentral understands “Itai” refers to Itai Capital, founded by businessman Ernest Kwinda.

MultiChoice Group, which Canal+ intends acquiring, will have a 49% economic interest in the South African licence holder and a 20% share of the voting rights. This will allow Canal+ to deal with the legislation that prevents foreign entities from controlling more than 20% of a local broadcaster.

“MultiChoice Group will also retain its existing 75% direct interest in MultiChoice South Africa, which will exclude LicenceCo,” MultiChoice said. “Phuthuma Nathi will similarly retain its existing 25% interest in MultiChoice South Africa,” it added.

The broadcaster said:

LicenceCo will enter into various commercial agreements with MultiChoice Group subsidiaries in relation to the services currently provided to LicenceCo by other MultiChoice Group entities. “These relate to, among other things, the provision of content, technology, subscriber management, support and other functions.”

The transaction will not lead to any disruption for LicenceCo’s South African viewers, who will continue to access its services as normal. In time, those subscribers will benefit from the additional content and technology investments envisaged by the MultiChoice Group, in its capacity as supplier to LicenceCo.”

“Canal+ and MultiChoice are confident that the envisaged structure meets the requirements of all applicable laws, including the restrictions on foreign ownership and control of broadcasting licences contained in the Electronic Communications Act.”