Naspers to unbundle MultiChoice
September 18, 2018
By Colin Mann
Global Internet and entertainment group Naspers has announced its intention to list its Video Entertainment business separately on the Johannesburg Stock Exchange (JSE) and simultaneously to unbundle the shares in this business to its shareholders. The new company will be named MultiChoice Group and will include MultiChoice South Africa, MultiChoice Africa, Showmax Africa, and Irdeto.
“This marks a significant step for the Naspers Group as we continue our evolution into a global consumer Internet company,” commented Naspers CEO Bob van Dijk. “Listing MultiChoice Group via an unbundling aims to unlock value for Naspers shareholders and at the same time create an empowered, top 40 JSE-listed African entertainment company.”
The transaction is expected to create further value for Phuthuma Nathi (PN) broad-based black economic empowerment (BBBEE) shareholders who have participated in one of the most successful BBBEE schemes in South Africa, already creating around ZAR12 billion in value for BBBEE shareholders. In recognition of PN’s support over the years, and to underline its commitment to transformation in South Africa, Naspers intends to allocate – for no consideration – an additional 5 per cent stake in MultiChoice South Africa to PN shareholders, prior to the unbundling, to increase MultiChoice Group’s BBBEE shareholding. This means that the PN shareholders’ interest in MCSA and its dividend flows is expected to increase by 25 per cent.
The additional 5 per cent stake in MultiChoice South Africa to PN shareholders is designed to reinforce MultiChoice Group’s commitment to broad-based black economic empowerment, increase PN’s upside in future value creation, and ensure continued compliance with regulatory requirements post unbundling.
Further, post-listing and subject to obtaining the necessary PN board and shareholder approvals, it is the ambition of MultiChoice Group to enable 25 per cent of the PN shareholders’ original shareholding (i.e. before the allocation of the additional 5 per cent) to be exchanged for MultiChoice Group shares that will be freely tradeable, thereby unlocking incremental value for PN shareholders.
“Listing and unbundling MultiChoice Group is intended to create a leading entertainment business listed on the JSE that is profitable and cash generative,” explained Video Entertainment CEO Imtiaz Patel. “We offer an unmatched selection of local and original content, as well as a world-class sports offering. Our leadership team is diverse, experienced and well-positioned to take the company forward. I am particularly pleased that this transaction will further enhance the value for Phuthuma Nathi shareholders.”
Naspers’ Video Entertainment business is one of the fastest growing pay-TV operators globally and its multi-platform business entertains 13.5 million households across Africa. In the last financial year, the business added 1.5 million subscribers, and generated revenue of ZAR47.1 billion and trading profit of ZAR6.1 billion. It employs more than 9,000 people in Africa and indirectly creates economic prosperity for over 20,000 more who are employed by its various partners and suppliers across the continent.
MultiChoice Group is expected to be unbundled with limited leverage, providing it with the necessary financial flexibility to pursue growth opportunities in African video entertainment. Africa is one of the fastest-growing continents by both GDP and population, its middle-class is rapidly expanding and the penetration of video entertainment is still relatively low. The business is also positioning itself for the future by offering online streaming services, including Showmax and DStv Now.
“There are significant growth opportunities for MultiChoice Group in Africa,” suggested Patel. “The combination of MultiChoice’s reach, Showmax and DStv Now’s cutting-edge internet television service, alongside Irdeto’s 360 security suite will provide a unique offering.”
“The Video Entertainment business is an African success story,” declared van Dijk. “This unbundling and listing is expected to deliver value to the South African economy as well as to Naspers and Phuthuma Nathi shareholders. Naspers will continue to invest in South Africa through our interests in ecommerce businesses such as Takealot, Mr D Food, PayU, OLX, Property24, and AutoTrader SA, among others.”
Naspers will retain its primary listing on the JSE as well as its interests in Media24. MultiChoice Group is anticipated to list on the JSE and simultaneously unbundle in the first half of 2019, subject to the approval of the requisite regulatory authorities.