Tension at MultiChoice over last-minute leadership changes

As the attempted acquisition of MultiChoice by French broadcaster Canal+ continues, the Business Times reports that rifts have begun to emerge over the last-minute decision to keep MultiChoice board chair Imtiaz Patel.

MultiChoice had previously announced that Patel would retire at the end of March, with Elias Masilela stepping into his shoes.

However, at a board meeting on 28 March, it was announced that Patel would continue in his role while Masilela would become the company’s deputy chair — a newly created position.

Lead independent director Jim Volkwyn reportedly chaired the meeting, and the alleged complaints revolved around how the decision gave the impression that Masilela was not competent enough to handle the Canal+ deal.

Responding to the Business Times, MultiChoice said the decision to extend Patel’s time as board chair was unanimous. It was also noted that Patel would not receive any additional fees that he wouldn’t have otherwise.

Patel declined to comment, referring queries to MultiChoice, while Masilela said he supported the decision.

Canal+ initially made an offer to buy out MultiChoice for R105 per share in February 2024.

This was after the group increased its shareholding in MultiChoice to 35.01% of the company, exceeding the 35% threshold before a mandatory offer must be made as set by the Companies Act.

MultiChoice publicly rejected this offer, and it was also chastised by the Takeover Regulation Panel.

“The TRP contended that the publication of, inter alia, the announcement without the approval of the TRP was unlawful, being in contravention of the Act and the Regulations, and issued a compliance notice against MultiChoice,” it said.

The panel ruled that Canal+’s offer did not qualify to discharge its obligations under the Act, and it had to make another one.

The French media conglomerate responded by increasing its offer to R125 per share in cash.

At that price, the remaining 64.99% of MutiChoice would’ve cost Canal+ over R35.9 billion.

However, Canal+ has continued buying MultiChoice shares on the open market while the company considers its offer. It now owns over 40% of the company.

Fair offer — expert

Urquhart Partners’ Richard Cheesman told Daily Investor that MultiChoice is difficult to evaluate, as it has a complex structure and multiple components.

“The group has made significant investments, some of which are paying off and others which are only expected to be profitable in the future,” said Cheesman.

He said the offer must consider that MultiChoice is facing off with global companies like Netflix and Amazon, as well as MultiChoice’s capital position — which included R8.1 billion debt at the end of September 2023.

“Taking this into account, it looks like the core South African business is then valued at about nine times earnings, which seems to be in the right ballpark,” Cheesman said.

While he sees the offer to be fair, he does not think it was “generous.”

“It’s not clear if the group’s substantial tax losses have been taken into account, and one would expect that the merged group will have better profitability in Africa, meaning that these will be able to be utilised earlier than otherwise,” said Cheesman.

“MultiChoice’s tax losses have substantial value, which may not have been captured in this valuation.”

He also does not believe the valuation accounts for the potential profitability of ventures like SuperSportBet and Showmax 2.0.