French broadcasting giant Groupe Canal+, by virtue of acquiring 35.01% of the shares in JSE-listed Multichoice Group, has triggered a mandatory share offer in terms of the Companies Act, which is enforced, in part, by the Takeover Regulation Panel (TRP).

So, what happens next?

As per the regulations, Canal+ plus must now make a “firm intention announcement” to MultiChoice shareholders. Section 111(2) of the companies regulations – an adjunct to the Companies Act – stipulates that the offer price must be, at a minimum, the highest price that Canal+ has paid for acquiring MultiChoice shares in the last six months.

“However, regulation 111(3) allows for deviations from the highest-price-paid principle if the offeror (Canal+) believes that it is not applicable in a particular case. An offeror may consult the [TRP], which has the discretion to agree to an adjusted offer consideration if it deems it appropriate under the circumstances,” according to the regulations.

Canal+ has been steadily buying up shares in MultiChoice since 2020. For much of that time, the South African broadcasting group’s share price soared above the R120/share mark. In the last year, however, the price has swung from a peak of more than R150/share, reached in February 2023, to a low point of R63.21/share last November.

It is unclear what the highest price is that Canal+ paid for MultiChoice shares in the last six months, but from historical share price data, the value must be a minimum of between R63/share and R92/share – well below the R105/share the French broadcaster has said it is prepared to pay shareholders to secure a deal.

Share price

MultiChoice shares peaked at R105/share earlier this month following the Canal+ indicative offer, which MultiChoice rebuffed as “undervaluing” the company. It touched R105.78 in morning trading on Wednesday on news of the TRP decision that a mandatory offer is now required, before pulling back slightly by lunchtime.

According to TRP guidelines, Canal+ is entitled to approach MultiChoice shareholders to discuss the offer prior to the firm intention announcement, although shareholders are bound to secrecy regarding these discussions until the announcement is officially made public.

Read: High drama as Canal+ told to make mandatory offer for MultiChoice

Only those shareholders with more than a 5% stake in MultiChoice may be approached, which means Canal+ can speak with the Public Investment Corporation (PIC) and Allan Gray – which hold 12.25% and 6% of MultiChoice, respectively, according to the most recently available disclosures that TechCentral was able to find.

It is possible, of course, that MultiChoice’s shareholders will rebuff the forthcoming mandatory offer by Canal+ if they don’t like the offer price. If shareholders choose to, they could vote to waive the mandatory offer by holding a vote and then notifying the TRP of their decision.

Fifty percent of the voting rights, other than those held by Canal+ (understood to be capped at 20%), must agree for the mandatory offer to succeed. Barring that, Canal+ is not at liberty to back out of the deal.

But even if the deal gets approval from shareholders, Canal+’s efforts to acquire MultiChoice could still be stymied by legislation that caps voting control of South African broadcasting licensees by foreign entities at 20%. This restriction is contained in the Electronics Communications Act.