MultiChoice Group is increasing its stake in BetKing, an Africa-focused sports-betting platform operator, to a non-controlling 49% investment for R3.8-billion.
The deal comes after MultiChoice in November bought 20% of BetKing for R1.8-billion.
As part of the new transaction, BetKing will firstly create an employee share option plan by allocating 10% of the company’s equity for this purpose. BetKing shareholders will have their stake in the business diluted as a result, with MultiChoice’s initial stake going down from 20% to 18%.
MultiChoice, through its subsidiary Mwendo, will then buy 9.6% of BetKing for US$100-million as part of an equity raise to fund expansion, resulting in the broadcaster’s stake increasing to 27.6%. Mwendo will also acquire a 21.4% stake in BetKing from minority shareholders, who are exiting partially, for $181.5-million, pushing the stake to 49%.
Steps 2 and 3 will occur concurrently, after the allocation of the shares for the staff incentive scheme. The total transaction consideration, which amounts to R281.5-million (R3.8-billion at the time of writing), will be debt funded, MultiChoice said.
Earn-out
As a result of the transaction, the earn-out from the original 20% investment transaction concluded last year will be triggered and a further $31-million will be payable. This will require MultiChoice to raise a total of R4-billion in rand-denominated debt.
Explaining the rationale for the deal, MultiChoice said consumers have a “growing abundance of entertainment options available to them. It is therefore important for MultiChoice to maintain its relevance and grow its share of engagement time and consumer spend by expanding its entertainment platform with a more comprehensive offering and a greater number of products and services.
“Pursuing an adjacency such as sports betting creates a natural extension to the MultiChoice video entertainment platform to further enhance its product set. Well established in Europe and fuelled by its legalisation in the US in 2018, the global sports betting market is currently experiencing a surge in growth.”
The transaction is expected to close in August 2021, once the conditions precedent have been met. These include finalisation of the employee share incentive scheme; securing of debt funding by MultiChoice; agreement of an appropriate exit clause for minorities who are partially selling down to recover some of their initial investment; and regulatory approvals by the relevant competition or antitrust authorities in several jurisdictions. – © 2021 NewsCentral Media
