by Thinus Ferreira
To push its aggressive takeover of South Africa's MultiChoice Group through successfully and circumvent the country's regulations preventing a majority-owned share in local media, France's Canal+ will restructure MultiChoice and carve out its broadcasting licence and South African DStv subscribers into "Licence Co" as a new separate entity while the remainder contains its video assets as the MultiChoice Group.
Canal+ is progressing with its aggressive buyout of R32 billion for MultiChoice although various regulatory hurdles are supposed to prevent foreign ownership of a large South African media company like MultiChoice.
Canal+'s plan for a "post-transaction structure" for MultiChoice is to carve out MultiChoice's broadcasting licence in South Africa, overseen by the Independent Communications Authority of South Africa (Icasa) and MultiChoice South Africa's DStv subscribers in South Africa into a new company called Licence Co.
Canal+'s Licence Co will be a new entity, while the remainder of MultiChoice's video entertainment assets will then remain part of the MultiChoice Group.
The MultiChoice broadcast licence carve out is part of Canal+ plan to circumvent and get around South Africa's broadcast and ownership regulations.
The dilemma Canal+ and MultiChoice have is that they can't legally get around a foreign entity owning a South African broadcast licence, in this case for traditional pay-TV.
The plan is now for this "problem-part" preventing Canal+'s MultiChoice takeover from going through - MultiChoice South Africa and its South African broadcasting licence and South African set of DStv subscribers - to be siloed as Licence Co.
Licence Co. in South Africa will literally hold the pay-TV licence and manage the DStv subscribers, while MultiChoice Group will legally-technically no longer be a broadcaster but a video content supplier.
Like a family trust, Licence Co, although an "independent" company, will exist with the express aim to benefit the MultiChoice Group.
Also to note: MultiChoice Group, belonging to French owners and as the so-called "video content hub", will now mean that Canal+ and MultiChoice's French owners will now be paying to keep the South African public broadcaster's SABC News, eMedia's eNCA and Newzroom Africa's as South African TV news channels on the air on DStv.
This is, in effect, a French private company paying for and in control of South African TV news, as well as news elsewhere in sub-Saharan Africa.
Canal+ and MultiChoice has to secure approvals for the mega-takeover deal from Icasa, the Takeover Regulation Panel, South Africa's Competition Tribunal, shareholders, the Financial Surveillance Department and adhere to other requirements like black-economic empowerment (BEE) and with Canal+ not have voting rights of more than 20% as mandated by the Electronic Communications Act.
On paper Licence Co will be a new "independent company" but in real effect work in tandem with MultiChoice Group - as it exists currently containing MultiChoice's operational structure, technology, staff and content assets.
Licence Co will become/remain the entity dealing with South African DStv subscribers.
Canal+ and MultiChoice plan to spin out Licence Co's ownership as majority-owned by the current Phuthuma Nathi scheme (27%), as well as two black-owned companies - Identity Partners Itai Consortium with Sonja de Bruyn and Afrifund Investments from the former Telkom CEO Sipho Maseko - as well as a Workers' Trust (ESOP).
With smart accounting and legal wrangling, Canal+ and MultiChoice are crafting it so that the MultiChoice's Group's shareholding in the new Licenco Co will be 49% and 20% on the dot in terms of voting rights - right what the regulators require.
"MultiChoice Group will retain its existing 75% direct interest in MultiChoice South Africa, which will exclude Licence Co. Phuthuma Nathi will similarly retain its existing 25% interest in MultiChoice South Africa," Canal+ and MultiChoice announced in a takeover update statement on Tuesday.
"The transaction will not lead to any disruption for LicenceCo’'s South African viewers, who will continue to access its services as normal. Licence Co will enter into various commercial agreements with MultiChoice Group subsidiaries in relation to the services currently provided to Licence Co by other MultiChoice Group entities," they stated.
"These relate to, among other things, the provision of content, technology, subscriber management and support and other functions."
"Canal+ and MultiChoice are confident that the envisaged structure meets the requirements of all applicable laws, including the restrictions on foreign ownership and control of broadcasting licences contained in the Electronic Communications Act."
Webber Wentzel and DLA Piper are the joint legal advisors to MultiChoice, while Herbert Smith Freehills and Werksmans are the advisors to MultiChoice on competition and broadcasting matters.
Citigroup Global Markets Limited and Morgan Stanley & Co International plc and the joint financial advisors to MultiChoice, while FTI Consulting are the so-called "strategic communications" advisors to MultiChoice.
Bowmans is the South African legal advisors to Canal+, with Bryan Cave Leighton Paisner LLP repping as the international legal advisors to Canal+, and BofA Securities and J.P. Morgan as Canal+'s joint legal advisors.
The Brunswick Group is the "strategic communications" advisors for Canal+.
In the joint statement, Maxime Saada, Canal+ CEO - and notably having his prepared quote placed first at the top - says "This transaction is an opportunity to create a unique global media company, with a strong presence across Africa, with the scale, expertise and creativity to compete and partner with the
largest players within the media sector and beyond".
"I am confident that the contemplated post-transaction structure will comply with South Africa's
laws and regulations. Canal+ has placed Broad-Based Black Economic Empowerment at the heart of the transaction and is delighted to welcome in this potential structure, alongside Phuthuma Nathi, new HDP shareholders and broadened employee ownership."
"We remain committed to deliver on our ambition to bring MultiChoice and Canal+ together, with
today's announcement representing another step forward."
The prepared quote from Calvo Mawela, MultiChoice Group CEO, states "We are very pleased about the progress that has been made in relation to this transaction".
"In a fast-evolving industry that is becoming increasingly competitive, the opportunity to combine our
efforts to increase scale and bring our subscribers an even better offering is something that
continues to excite us."
"MultiChoice has a long and proud history of creating significant value for the shareholders of
Phuthuma Nathi, one of the most successful BBBEE schemes in South Africa."
"To continue this journey with Phuthuma Nathi, while at the same time broadening the BBBEE participation in our business through new partnerships that also involves our staff, is an inspiring prospect."
