Canal+ and MultiChoice Consider Solutions to Ownership Regulations

Canal+ MultiChoice Ownership faces a stumbling block. France’s Group Canal+ and its acquisition target, JSE-listed MultiChoice Group, have implied ways to get around the regulations on foreign ownership of broadcasters in South Africa.

However, they can only go ahead if their deal is given the go-ahead by shareholders.

Canal+ MultiChoice Ownership Rules Workaround

The two companies put out a joint circular (PDF) to shareholders on Tuesday. In the circular, they set out in detail the terms of the proposed mandatory all-cash transaction. The transaction is valued at R125 per MultiChoice share.

This regulation in the ECA will be one of the biggest stumbling blocks in the way of sealing the deal between the two companies.

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“Canal+ and MultiChoice are respectful of all applicable laws and regulations relating to the sectors in which they operate,” the two firms said in the joint circular.

“Certain entities within the MultiChoice Group are subject to the applicable laws in the electronic communications sector in which MultiChoice operates that have foreign control restrictions. These include section 64 of the ECA, which places certain restrictions on foreign entities (such as Canal+) in respect of commercial broadcasting licensees,” they said.

The circular also read, “In light of the duty of Canal+ to make a mandatory offer for the MultiChoice shares. Canal+ and MultiChoice are in the process of assessing and finalizing suitable structuring options and potential transaction.

This may be undertaken by the MultiChoice Group on or shortly before the closing date to ensure compliance with the applicable limitations on foreign control while also maintaining MultiChoice’s broad-based black economic empowerment credentials.”

Canal+ MultiChoice Partnership Faces a Stumbling Block

With the takeover now likely, Canal+ is left with the difficulty that South African laws prevent foreign entities from exercising voting rights above a 20% threshold on holders of commercial broadcast licenses.

According to the Takeover Regulation Panel, this restriction does not prevent MultiChoice from taking control of MultiChoice.

However, it does put a stop to the capacity of a foreign entity to exercise total control over and have an interest in the holder of a commercial broadcasting service license above a 20% threshold in South Africa.

However, Canal+ could still exercise voting rights on “other (non-licensee) matters”, that 20% rule would be highly restrictive.

The licensed entities within MultiChoice Group include MultiChoice South Africa, MultiChoice Africa, premium rights holder M-Net, and sports broadcaster SuperSport. Canal+ doesn’t have control over these entities.

That leaves out only support functions and the advertising sales side of the business plus technology outfit Irdeto, production arm MultiChoice Studios, and streamer Showmax.

Conclusion

The time span for acceptance of the offer is long. It will close in April 2025, this gives Canal+ time to come up with a solution.

Canal+ has said it will also respect MultiChoice’s dedication to building its business with social transformation in South Africa in mind through fostering Broad-Based Black Economic Empowerment (BBBEE) initiatives.