MultiChoice surges on Canal+ potential deal

Shares of MultiChoice soared on the Johannesburg Stock Exchange (JSE) after news broke that Canal Plus had made a non-binding offer to acquire shares in the group that it does not already own. The offer, valued at R105 per share, represents a 40% premium to MultiChoice's closing price on Wednesday. The stocks jumped as much as 27%, making it the best performing stock on the JSE, although it has since paired gains to around 23%. Canal Plus currently holds a 31.7% stake in the Africa media group. Nick Kunze, Senior Portfolio Manager at Sanlam Wealth, believes this offer is a good deal. He sees it as an opportunity for shareholders to capitalize on the offer, considering MultiChoice's recent disappointing performance. The company has struggled to compete in the streaming space, facing challenges from platforms like Netflix. Kunze notes that MultiChoice's earnings have been lackluster, making the acquisition by Canal Plus a potentially favorable outcome for shareholders. Despite some regulatory hurdles, including South Africa's foreign ownership restrictions, Kunze remains optimistic about the deal going through. He argues that in the streaming era, geographical barriers are diminishing, and the competition commission is likely to approve the acquisition. However, the duration of the regulatory process poses a risk for shareholders, especially if the deal faces delays. When discussing MultiChoice's positioning in the market, Kunze acknowledges the company's efforts to enhance its streaming service through investments in Showmax Africa. However, he points out that MultiChoice has failed to keep pace with the rapidly evolving streaming landscape dominated by global players like Netflix. The company's stock price has suffered, prompting Canal Plus's offer as a strategic move to expand its reach in the African continent. Regarding the possibility of a higher offer, Kunze suggests that shareholders should carefully consider the current premium and not overly speculate on future increases. While the economic environment and potential government initiatives could impact MultiChoice's valuation in the future, Kunze advises shareholders to assess the current offer objectively and not to hold out unrealistically for better terms. In conclusion, Kunze highlights the importance of evaluating the deal from a risk-reward perspective, considering MultiChoice's turbulent financial performance and the competitive challenges it faces in the streaming market. He emphasizes the need for shareholders to weigh the potential gains from the acquisition against the inherent uncertainties in the media industry. As the market awaits further developments, the spotlight remains on MultiChoice and Canal Plus as they navigate the complexities of the proposed acquisition and its implications for the African media landscape.