Big hurdles for Canal+ MultiChoice takeover

While Canal+ and MultiChoice have reached an agreement about the former’s buyout offer of around R35 billion, the two companies will need to clear many regulatory hurdles to successfully complete the deal.

The plan to proceed with the takeover was confirmed in a joint circular in early June 2024, which laid out plans and dates for the deal.

That came after MultiChoice appointed an independent board to consider a revised offer by the French media giant to buy all outstanding shares in the company for R125 each.

For the transaction to proceed, the companies must secure a myriad of approvals, including from the Financial Surveillance Department, Competition Tribunal, JSE, Takeover Regulation Panel, and broadcasting industry regulator Icasa.

MultiChoice and Canal+ are aiming for all conditions to be satisfied by Tuesday, 8 April 2025, at the latest.

ICT policy legal expert Lisa Thornton told MyBroadband that the deal’s success will depend on its structure.

Importantly, the companies will need to find a way to continue limiting Canal+’s voting rights in MultiChoice to 20%, a requirement for broadcasting licensees under the Electronic Communications Act (ECA).

“As a foreign entity, Canal+ may not have more than 20% voting rights in the SA licensees in the MultiChoice group,” said Thornton.

Canal+ already owns around 45.2% of MultiChoice, but its voting rights on important company decisions are limited to 20% as part of conditions in MultiChoice’s memorandum of incorporation.

Black ownership rules

In addition to the voting rights limit, Thornton said that the companies Canal+ will have to meet Broad-based Black Economic Empowerment (BBBEE) rules set out by the Independent Communications Authority of South Africa (Icasa).

“In particular, 30% [of a licensee] must be owned by South African BBBEE parties,” said Thornton.

“This might entail establishing a South African entity to hold the licensees in question and a partnership with local black entities/persons.”

Among the noteworthy businesspeople reportedly engaging with Canal+ about the deal is billionaire Patrice Motsepe, one of South Africa’s richest people.

Motsepe is well known for leveraging South Africa’s BEE rules in building his highly successful African Rainbow Capital business, so he could prove to be a valuable partner.

Patrice Motsepe, ARC founder and one of South Africa’s richest people (left), and ANC secretary-general Fikile Mbalula (right)

Thornton pointed out that even if the companies satisfied the foreign ownership and BBBEE requirements, they could still have difficulty convincing competition regulators to approve the deal due to MultiChoice’s dominant position in satellite TV in South Africa.

The Competition Act defines a dominant firm as a company with at least 45% share.

In eMedia’s case against MultiChoice over the removal of four of its channels from DStv’s bouquets, the Competition Tribunal determined MultiChoice had captured 72% of the basic satellite market.

“It is undisputed that MultiChoice has been a dominant firm in the market for decades and that its dominance will not change in the near future,” the Competition Tribunal found.

The Competition Commission and the Competition Tribunal must consider whether the deal could lessen competition in South Africa’s satellite broadcasting market.

Canal+ does not currently operate in South Africa. It would effectively just take over MultiChoice’s market share. At face value, the competition landscape in satellite broadcasting would remain unchanged.

However, Canal+’s vast resources and expertise could enable it to further cement or improve MultiChoice’s dominance in South Africa.

One mitigating factor that could favour Canal+ is that MultiChoice’s broadcasting business has been in decline in recent years as more households started using online video streaming services.

In this market, Netflix is a dominant player, although MultiChoice also has a formidable competitor in the form of Showmax.

The Competition Commission and Tribunal may need to consider the broader entertainment market and trends, given that Canal+ also competes in video streaming.

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Big hurdles for Canal+ MultiChoice takeover