Naspers spins off MultiChoice at initial value of R42bn

Multichoice press statement:

MultiChoice Group Limited (MCG) today listed on the Johannesburg Stock Exchange (JSE). The listed MCG includes MultiChoice South Africa (MCSA), MultiChoice Africa Holdings (MAH), Showmax, as well as the global digital platform security provider Irdeto, and all their subsidiaries and affiliates (MultiChoice Group).

As Africa’s most loved storyteller, MultiChoice Group brings leading local and international entertainment and sport content to around 14m households in 50 African markets, providing viewers with access to content from 8 out of 10 major international studios. Importantly, MCG is differentiated by its production of over 4,500 hours of local content in 10 studios across Africa. Showmax alone has 17,500 hours of content with half being local content. Furthermore, MCG offers a world of champions with over 37 sports channels providing sports fans viewership of most iconic global sport events.

Calvo Mawela, Group CEO, commented:

Today’s listing is an important milestone in our exciting journey of growth. As one of the fastest growing pay-TV broadcast providers globally, our strong financial position at listing is backed by attractive long-term growth opportunities in both subscriber numbers and revenue. MCG has a highly cash generative core with no financial debt, and we are poised to deliver value to our shareholders over time.”

While MCG continues to drive incremental mass-market growth in its South African base, the business on the rest of the continent has stabilised with a value strategy driving operational and financial improvements. Moreover, there is meaningful scope to drive up pay-TV penetration in the rest of Africa in the mid to mass market while the connected video services represent a fast-growing, longer-term opportunity.

The cutting-edge innovation of Irdeto, our global digital platform security company, further underpins our competitive position. Irdeto provides world-class technical capability to MCG as a global leader in protecting platforms and applications for video entertainment, video games, connected transport and IoT connected industries. Irdeto is independently profitable with more than 400 global clients including Airtel, Charter, Electronic Arts, Fox, Foxtel, IBM Security, KPN, Liberty Global, Premier League, Tata Sky, Warner Brothers, XPENG. Irdeto allows MCG to rapidly deploy the world’s best technology to global customers and generate a healthy revenue stream.

Read also: Patel: ‘MultiChoice is set to become a Top 40 JSE-listed company’

The listing and impending unbundling of MCG by Naspers Limited reinforces the commitment of both MCG and Naspers Limited to broad, socio-economic transformation in South Africa. Phuthuma Nathi (PN) shareholders will be allocated an additional 5% stake in MultiChoice South Africa (MCSA) for no consideration, thereby increasing their indirect interest in MCSA from 20% to 25%, and result in a 25% increase in PN’s share of MultiChoice dividend flows. Through PN, MCSA has provided long-term, far-reaching benefits to 90,000 individual and institutional B-BBEE shareholders, with a return on investment of approximately 17 times since inception.

Bob van Dijk, Naspers Chief Executive Officer, commented:

“Today is a proud day for Naspers. Listing MultiChoice Group through an unbundling unlocks value for Naspers shareholders by creating the opportunity for them to own a direct stake in MultiChoice Group, a top-40 JSE-listed African entertainment group. We are also very pleased to be able to create further value for Phuthuma Nathi shareholders, who, through MultiChoice South Africa, have already participated in one of South Africa’s most successful empowerment schemes. As MultiChoice Group embarks on its next exciting chapter I look forward to seeing the team build further on their impressive success story.”

Mawela concluded:

We are overwhelmingly positive about MultiChoice Group’s future. With the largest pay-TV footprint across Africa, we understand our customers and tailor our offering and services to suit market-specific video entertainment needs. This, coupled with a leading content offering, world-class technology and infrastructure, pan-African scale and strong in-country capabilities, positions us well to generate shareholder returns and future growth.”

Naspers Spins Off African Pay-TV at Initial Value of $3 Billion

By Loni Prinsloo

(Bloomberg) – Naspers Ltd. spun off African pay-TV unit MultiChoice Group Ltd. at an initial valuation of about R42bn ($3bn), enabling the continent’s biggest company to focus on its current incarnation as a global internet-technology firm.

Read also: Naspers’ Koos Bekker: Ultimate insider’s view of Davos, Facebook, MultiChoice and more

MultiChoice shares started trading at R95.5 in Johannesburg, and was at R96.15 as of 9:13am. Naspers, which makes up almost a fifth of Johannesburg’s stock exchange, traded 2.3% lower at R3,069.99 after the spin off.

Key insights:

  • MultiChoice’s valuation could eventually settle at about $5-6bn, according to Bloomberg Intelligence analyst John Davies.
  • The shares may be volatile in the meantime, however, as Naspers shareholders who automatically receive MultiChoice stock take time to decide whether or not they want a pure Africa-TV play.
  • Naspers has come a long way since founding MultiChoice in 1985, most notably making a jackpot investment in Chinese Internet giant Tencent Holdings Ltd. in 2001. That 31% stake is now valued at about $129bn, more than Naspers as a whole, and an effort to close the deficit is one of the reasons behind the MultiChoice separation.
  • MultiChoice has almost 14m subscribers, of which about half are in South Africa.
  • Among its challenges as a standalone company will be to reverse slowing revenue growth on the rest of the continent, where cheaper alternatives – including Netflix Inc. – have sprung up alongside rising household incomes and faster internet speeds.
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