Watchdog: Canal+ must make mandatory bid for MultiChoice

Source: MultiChoice

South African competition watchdog the Takeover Regulation Panel (TRP) has ruled that Canal+ must make a mandatory offer to buy the shares in pay TV operator MultiChoice that it does not already own.

The move comes after the French pay TV operator upped its equity stake in MultiChoice to 35.01%, taking it above the 35% threshold where a mandatory offer is required.

Canal+ made an offer to take over MultiChoice that was then rejected by the operator’s board on the grounds that it undervalued the company.

The South African pay TV operator said that its board “has concluded that the proposed offer price of ZAR105 in cash significantly undervalues the Group and its future prospects”.

MultiChoice said that it had recently conducted a valuation exercise that valued the company “significantly above R105 a share” and argued that this valuation excluded synergies that could arise from Canal+’s acqusi8tion of the company.

Regulator’s reasoning

Following the revelation that MultiChoice had referred Canal+’s upping of its bid to the TRP, the French pay TV operator argued that it would not be required to make a mandatory offer as MultiChoice’s own rules of incorporation held that non-South African companies should be restricted to holding 20% of the company’s voting rights.

Canal+’s argument rested on the reasoning that, since it could not vote above the 20% threshold, it had not acquired voting rights associated with any shares it acquired above the 35% mandatory offer threshold, and therefore there should be no requirement to make such an offer.

This line of reasoning was rejected by the TRP, which censured MultiChoice for announcing publicly that it had requested the TRP to clarify the matter, and ruled that Canal+ has to make the offer.

The watchdog said that the relevant section of MultiChoice’s articles of incorporation “applies if and only if either of two threshold-related circumstances arises and then only in order to ensure compliance with a defined foreign control restriction”. That defined restriction means “the ability of a foreigner to exercise control over and have an interest in the holder of a commercial broadcasting service licence above a 20% threshold” and does not apply to votes cast on “other (non-licensee) matters”.

In short, Canal+ has voting rights above 35% on “non-licensee matters” and must make a bid.