By Chukwudi Iwuchukwu
Africa’s largest pay-TV operator, MultiChoice, has recommended that shareholders accept a $2.9 billion buyout offer from a French media company called Canal+.
If completed, the Bolloré family’s Vivendi, which owns Canal+, will control DSTV, Showmax, GoTV, and several sports broadcast licenses in Africa, a deal that could significantly transform paid TV on the continent.
Why do Vivendi and Canal+ want to buy MultiChoice? Who are they, and how will this affect viewers?
Let’s unpack what clues we can find.
Vivendi, a mass media and communications company with headquarters in France, owns CANAL+, the company bidding for MultiChoice.
The company is owned by a family called the Bolloré family, a wealthy multi-billionaire company from France that made their money from port, logistics, and shipping.
They also owned a media company called Canal TV.
Canal is a big media company with about €9.6 billion in revenue, which makes it about 3.2 times larger than MultiChoice.
Vivendi might sound new to many people, but they have been very active in Africa.
When it comes to TV in Africa, you have two big blocks: the English-speaking block and the French-speaking block.
In the French-speaking block, Vivendi, through CANAL+, has strong representation, with 7.6 million subscribers on the continent.
This is impressive, but still much smaller than MultiChoice, with 22 million subscribers.
With the deal, CANAL+ would effectively control paid TV in Africa.
However, even if the deal fails, Vivendi/CANAL+ already holds a significant influence on paid TV in Africa, as they currently hold over 42% of the shares in MultiChoice.
Vivendi has been steadily increasing its shareholding in MultiChoice as a high school boy pursues his crush.
Every year, it has maintained that MultiChoice is “just a friend,” but now it has come out and proposed to buy MultiChoice outright.
Why do they want MultiChoice?
When we look at Vivendi’s latest annual report, we get a bit of the rationale.
The company has three strategic pillars: transformation, internalisation, and integration.
The one to focus on is internationalisation.
Vivendi makes most of its revenue from France, which, like most of Europe, is not a high-growth area, so it’s no wonder there is a push for “internationalisation,” especially through mergers and acquisitions into new markets.
What better place to expand than into Africa?
Despite Africa’s challenges, the growth potential is there for those who are patient.
So, buying a company that would allow you to control paid TV on the continent, which will have the largest labour force in the world by 2050, seems like a good idea.
Additionally, MultiChoices’ stock price has been falling for a while, so it is relatively cheaper than before, especially if you factor in the depreciation of the rand.
Furthermore, international players have put more pressure on MultiChoice, making it appear weak.
Vivendi may also want to strike before other players get interested.
MultiChoice has partnered with Comcast’s NBC Universal and Sky on the new Showmax.
On a revenue basis, Sky is nearly 2x the size of Vivedi, while Comcast is over 10x larger.
These factors combined suggest that now could be a good time to strike for Vivendi.
Will the deal go through? Due to a variety of issues, it is difficult to determine whether the deal will proceed. For example, there is a law in South Africa governing what percentage of foreign investors can own a broadcaster in that country.
The second and potentially larger hurdle is South Africa’s Electronic Communications Act, which prohibits foreign entities from holding more than 20 percent of the voting rights of a local broadcasting rights holder.
In the circular, the companies said they were “assessing and finalising suitable structuring options and potential transactions” to ensure compliance with that rule while ensuring MultiChoice could still retain a minimum level of black shareholding under South Africa’s empowerment rules. Canal+ said it was “fully committed” to ensuring MultiChoice retained its black ownership credentials.
One tricky topic Vivendi may need to navigate is how some French organisations are sometimes perceived as imperialist in Africa.
They may need to tone down such statements.
“Vivendi is one of the few groups that can spread the influence of European culture worldwide.”
It is still early days, so I expect a lot to happen. For consumers, at least in the short term, there will be minimal impact, but for the management team of MultiChoice, I can imagine this could be difficult to navigate.
