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Why did MultiChoice reject Canal+ $2.15 billion offer?

MultiChoice, the pan-African broadcaster, recently made headlines when it rejected a $2.15 billion acquisition offer from Canal+, the Vivendi-owned pay-TV company.

This unexpected decision surprised shareholders and industry experts alike, as the offer represented a 40% premium on MultiChoice’s then-share price. So why did MultiChoice turn down such a lucrative offer?

According to reports, MultiChoice’s board of directors deemed Canal+’s bid “significantly undervalued.” In a statement, the South African media group revealed that it had recently conducted a valuation audit, which led them to believe that their share value was “well above” the proposed offer of 105 rand per share. This valuation audit likely played a critical role in the board’s decision to reject the offer.

MultiChoice’s market capitalization stood at $2.15 billion at the time of the offer, making it a significant player in the African broadcasting industry. With a strong presence in various African countries, the company has established itself as a regional powerhouse. It delivers both satellite and digital television services to millions of subscribers across the continent, making it the number one pay TV provider in many French-speaking African nations.

The rejection of such a substantial offer raises questions about MultiChoice’s confidence in its future growth prospects. By turning down Canal+’s bid, the South African giant is signaling to its shareholders that it believes its value will continue to increase, and that it has an optimistic outlook for the future.

However, it’s worth noting that the market responded positively to Canal+’s offer, causing MultiChoice’s stock price to jump on the Johannesburg Stock Exchange. This suggests that investors saw value in the proposed acquisition. Analysts have commented that while Canal+’s offer seemed reasonable, there is a possibility that the company could have made an even stronger bid given its financial capacity.

It’s also important to consider the broader context of the media industry when examining MultiChoice’s decision. The rise of streaming services and the changing landscape of television consumption have undoubtedly impacted the traditional pay-TV business model. As more viewers shift to digital platforms, pay-TV providers like MultiChoice may face increased competition and evolving consumer preferences.

This changing landscape could be a consideration for MultiChoice’s board as they assessed Canal+’s offer. They may be looking to future-proof the company and ensure its long-term sustainability in an industry that is undergoing significant transformation.

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Why did MultiChoice reject Canal+ $2.15 billion offer?
MultiChoice (shown here with the company logo on its head office) feels it has been undervalued by Canal+’s offering. Rights reserved.

Despite the apparent disparity, MultiChoice’s board of directors articulates in its statement a willingness for open discussion and exploration of all possible strategies that could enhance shareholder value, as indicated by reports from Reuters. Specifically, the South African conglomerate expresses interest in having Canal+, the French firm, consider potential synergies derivable from merging two dominant players within Africa’s audiovisual landscape in their valuation.

In its formal announcement issued on February 1 regarding the proposed acquisition offer, Canal+ emphasized that procuring MultiChoice would enable this newly created entity to augment its geographical reach; create original and high-aspiring African content; provide greater support for domestic production firms; and widen sport access among subscribers.

South African law enforcement is known for being rigorous concerning such matters. However, certain shareholders of MultiChoice could potentially facilitate an agreement between both corporations.

Simultaneously with these developments, Canal+ further increased its ownership stake in MultiChoice from 31.67% to 35.01%, crossing over into territory where a compulsory offering becomes necessary due to regulatory edicts. With respect to these adjustments outlining that all other stakeholders ought to receive a mandatory purchase offer according to South African legislation, MultiChoice officials have hence requested guidance regarding compliance obligations pursuant to this regulation on mandatory offers.

Mark Narramore suggests: “While South-African legal authorities are stringent about compliance with such statutes some vested interests within Multichoice may be instrumental in forging an accord between both parties”.


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