DealMakers - 2024 Annual
Deal of the Year
Groupe Canal+’s acquisition of MultiChoice
The announcement in March 2024 marked the largest media M&A deal in Africa, valuing MultiChoice at R55bn.
Canal+ had been aggressively buying MultiChoice shares for some four years after it started building its stake with an initial purchase of 6.5% in early October 2020. In February 2024, the French company made an offer to acquire the rest of MultiChoice at R105 per share, but the offer was rejected as too low. Undeterred, Canal+ continued to acquire MultiChoice shares on the open market, increasing its stake to 35.01%, triggering a mandatory offer. The offer was increased to R125 per share.
The acquisition of the remaining 64.3% at R125 per share – a premium of 63.96% to the 30-day VWAP, has the potential to create a media and entertainment player for Anglophone and Francophone audiences across the continent, and the scale to compete with the global majors.
Local Advisers
Citigroup Global Markets, Morgan Stanley, Merrill Lynch, J.P. Morgan, Rand Merchant Bank, Bowmans, Webber Wentzel, DLA Piper South Africa, Herbert Smith Freehills South Africa, Werksmans and Standard Bank.
Canal+ runs pay TV services in France and in several European and African countries. It also runs production and distribution company, StudioCanal. Overall, it has more than 26 million subscribers in 50 countries worldwide. Africa is central to its long-term strategy, with a young and growing subscriber base. MultiChoice has almost 20 million customers in 50 markets across sub-Saharan Africa. In addition to its DStv, Showmax, SuperSport and M-Net media companies, MultiChoice’s diversified offering includes medical and security mobile solutions (Namola), cybersecurity (Irdeto) and sports betting (BetKing).
A key factor affecting the execution complexity of the transaction is the different sets of legislation and regulation that apply to the media and entertainment industry in South Africa. The Electronic Communications Act (ECT) of 2005 governs the licensing requirements for players in the industry and states that foreign companies may not hold more than 20% of voting rights in a licensed operator. Since Canal+ owns more than 40% of MultiChoice’s shares, the voting rights of these shares will be scaled back to under 20% to ensure compliance with the limitations on foreign control.
The MultiChoice Group will be restructured so that the current holder of the broadcasting licence in SA and the entity that contracts with SA subscribers, MultiChoice (Pty) Ltd, will be carved out of the group. The group will retain the remaining assets. The new entity, LicenceCo, will be majority owned by BEE parties – Phuthuma Nathi (27% economic interest), the Identity Partners Itai Consortium, the Afrifund Consortium and a Workers' Trust (ESOP).
MultiChoice has been dealing with several headwinds which have taken their toll on the business, ranging from cost-of-living pressures, shifting consumer preferences for entertainment, rising operating costs and increased competition from international streaming giants, resulting in a worrying decrease in subscriber numbers – 20% in the last year.
There are substantial efficiencies to be unlocked across a combined group and joining forces with MultiChoice would significantly bulk up Canal+, which was demerged from parent Vivendi and listed on the LSE in December 2024. Scale matters in this industry, and the most obvious benefit for Canal+ is the greater leverage of 46 million subscribers when negotiating rates for content and screening rights.
A combined group would be better positioned to address structural challenges resulting from the ongoing digitalisation and globalisation of the media and entertainment sector. In the words of Canal+ Chairman and CEO Maxime Saada, “By combining the scale, complementary geographies and content portfolios of our two companies, we will create an entertainment group with international reach and strong local roots”
Comment from the Independent Panel: A transformational transaction to create a business that has presence in 50 countries in Africa and the scale to compete with the global majors. The panel noted that this transaction has not yet been implemented. However, given the importance of this transaction for the African continent and its significance in media globally, this transaction was selected as the winning deal.
Pick of the best in no particular order
Pick n Pay Stores’ recapitalisation and Boxer listing
The decline in Pick n Pay’s earnings, alongside an escalation in the Group’s net debt position from R3,7bn in February 2023 to R6,1bn a year later – exacerbated by the trading loss in the Pick n Pay segment of R1,5bn and an overall loss at Group level of R3,2bn for FY2024 – placed significant pressure on the Group’s long-term debt covenants, with net debt/(net cash) to EBITDA ratio increasing from 1.1 to 6.3 times.
As part of the Pick n Pay Board’s strategic response to safeguard the Group’s liquidity and to strengthen the underlying performance of the core Pick n Pay supermarkets business, the Board prioritised the development of a sustainable capital structure for the Group to reduce debt levels, provide sufficient support for investment in the turnaround of the core Pick n Pay supermarkets business, and unlock shareholder value embedded in the Group by listing its discount grocery retailer, Boxer.
Local Advisers
Rand Merchant Bank, Standard Bank, Absa CIB, Morgan Stanley, Bowmans, Webber Wentzel and EY.
WeBuyCars’ unbundling and listing
Transaction Capital (TC) acquired a 49% stake in WeBuyCars (WBC) for R1,84bn in 2020, investing a further R1,6bn in 2021 to increase the shareholding to 74.9%.
Founded in 2001 by brothers Faan and Dirk van der Walt, WBC primarily trades used vehicles through its e-commerce platform and dealerships, which also offer funding and insurance. The group comprises 3,100 employees, 17 vehicle supermarkets, 80 buying pods, and over 380 buyers nationwide.
The unbundling and listing of WBC was initially pitched to TC as an mechanism to unlock value, given the significant liquidity challenges the company was facing at the time. The declining fortunes of subsidiary SA Taxi, the deep trading discount at which the Transaction Capital share price was trading, and its overall debt position placed it under immense financial pressure.
Pick n Pay’s integrated two-step recapitalisation, first announced in February 2024, comprised a R4bn rights offer and the JSE/A2X listings of its Boxer Retail business. Established in KwaZulu Natal in 1977, Boxer has c.500 multi-format stores across South Africa and Eswatini and caters to the lower-to-middle income urban, peri-urban and rural communities. It has 68.2% of the grocery discount retail market in South Africa. It operates in three complementary formats: Boxer Superstores, Boxer Liquors and Boxer Build.
The R4bn equity capital raise via the underwritten rights offer was used to repay Pick n Pay’s short-term debt and provide operational liquidity for the group ahead of the proposed Boxer IPO. The rights offer was 106% oversubscribed, which saw the Pick n Pay Group returning to a positive equity position of R2,9bn.
The listing provided a platform for Boxer shares to trade freely and unlock the inherent value of the business for Pick n Pay and Boxer’s new shareholders, as well as provide it with access to capital markets to support and develop future growth. The listing also facilitated the recapitalisation of Pick n Pay and facilitated the incremental operational funding needed for the Pick n Pay Group for the next two financial years.
The IPO launched in November with a price range of R42.00 to R54.00 per share, with the final offer price fixed at the top of the range. More than 150 investors submitted orders, resulting in the IPO closing multiple times oversubscribed and raising R8,5bn (including the overallotment option) – the largest African IPO in 2024.
The execution of the integrated two-step recapitalisation plan was complex, spanning several funders, regulators and shareholders. At the time, Pick n Pay CEO Sean Summers said, “We have had to step through two massive corporate transactions, with a very complex lender situation with 11 banks.” The execution of the Boxer IPO required a restructure of the Pick n Pay Group to facilitate the listing, comprising of inter-related steps and culminating in the formation of a new entity, Boxer Retail. As a sub-IPO of an existing listed entity, numerous discussions were held with lenders, the JSE and shareholders to facilitate an effective disposal of Boxer, requiring lender waivers, consents and approvals.
The successful implementation of the recapitalisation plan – achieved within a period of less than 12 months – together with the turnaround strategy, has taken Pick n Pay from an over-geared, embattled company to one better-placed for long-term, sustainable growth, while still retaining a 60% shareholding in Boxer Retail.
Comment from the Independent Panel: This two-stage process unlocked value for Pick n Pay shareholders and resulted in the largest African IPO in 2024.
Given the various parties, the entire process – from internal restructuring to capital raising, listing and regulatory approvals – required careful project management. The tight timelines, the complexities of the mechanisms utilised, and the multiplicity of concurrent workstreams presented a challenge.
The unbundling of WBC from TC echoed a growing trend in the equity capital markets, an indication of the effectiveness of unbundling to enhance growth opportunities, value realisation, and capital allocation optimisation. From a TC perspective, the value unlocked through the pre-listing capital raise initiatives was able to right size the capital structure to reposition the group for further growth. WBC’s listing resulted in TC’s complete exit from the second-hand car retailer.
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The listing of WBC was a significant milestone, reflecting investor confidence in the company’s business model and growth potential. The successful capital raise highlighted strong market demand for the shares, and confidence in the automotive retail sector. The listing resulted in a significant value unlock for shareholders of TC, provided much needed liquidity of R900m and R1,25bn to TC, while enhancing value for WBC and its founding shareholders.
The value created by WBC for shareholders since listing is significant – the share price has more than doubled (debuting at R20.50), with a current market capitalisation of R17,2bn. WBC continues to gain market share, with sales volumes surpassing 14,000 units in the three months to October 2024.
Local Advisers
PSG Capital, Pallidus Capital, Cliffe Dekker Hofmeyr, Werksmans, ENS, Deloitte, PwC and BDO.
Comment from the Independent Panel: This phase of the WeBuyCars growth story unlocked value for Transaction Capital shareholders and allowed the market access to this successful business.
Dirk van der Walt
Faan van der Walt