South African conglomerate Naspers is to move ahead with its spin-off of pay TV group MultiChoice on February 27, giving Naspers shareholders a direct stake in the pay TV outfit and listing the company on the Johannesburg stock exchange.
In its statement ahead of the listing on the Johannesburg stock exchange, Naspers said that it no longer made strategic sense to wed its high-growth global internet business with its slower-growth but cash-generative African video entertainment business, with no synergies between the pair. Post-split, Naspers will continue to shift its focus to the global internet business.
Naspers’ 31.2% stake in Chinese internet giant Tencent has been seen as key to the decision to spin off MultiChoice as Naspers shares trade at a significant discount to Tencent, the group’s most important asset. Other investments include a 28.4% stake in Russian internet outfit Mail.ru, a 43.1% stake in Indian travel website MakeMyTrip and a 22.8% stake in online food delivering company Delivery Hero.
MultiChoice had 13.9 million customers across 50 countries as of September 30. The company offered digital satellite TV and SVOD to some 7.2 million subscribers in South Africa, while its digital satellite, online and digital-terrestrial services had a base of 6.7 million across the rest of Africa.
The South African business is cash-generative and MultiChoice aims to expand its base here by focusing on acquiring quality local and international content, including sports. The group is undertaking a review its pricing strategy for its loss-making rest-of-Africa activities as it seeks to expand its base in the region and return to profitability.
Naspers said that MultiChoice subscriber base grew by 13% year-on-year to March 2018, the end of its full financial year. Revenues amounted to ZAR47.5 billion (€3 billion), down slightly on the prior year’s ZAR47.7 billion, while trading profit stood at ZAR6.3 billion, up from ZAR5.3 billion.
The MultiChoice Group also includes content security technology outfit Irdeto.
MultiChoice invested some ZAR2.8 billion in local general entertainment content in the year to March 2018 and ZAR1.3 billion in local sports rights.
By comparison, Naspers’ overall group revenue for the 2017-18 financial year was US$20.1 billion (€17.1 billion), while its trading profit was US$3.4 billion.
Naspers unveiled its plan to spin off MultiChoice last September and simultaneously unbundle the shares in the business to its shareholders.
The plan included a commitment to allocate an additional 5% stake in MultiChoice South Africa to black economic empowerment initiative Phuthuna Nathi shareholders for no additional consideration, increasing its stake in the South African unit to 25%.
Naspers named a new management team to lead the independent MultiChoice in October, with regulatory and policy chief Calvo Mawela named as CEO and Naspers Video Entertainment boss Imtiaz Patel named as executive chairman.
Mawela said: “We believe the listing of MultiChoice provides an excellent opportunity to invest in the leading provider of video entertainment on the African continent. MCG brings an incomparable local and international content offering to around 14-million households and is one of the fastest growing pay-TV broadcast providers globally. With strong financials, the flexibility of an ungeared balance sheet and deep local knowledge, we hope to deliver excellent returns to shareholders over time.”
Bob van Dijk, Naspers CEO, said: “MultiChoice Group is a pioneer in video entertainment across Africa and we are extremely proud to have built this company into a major success from the time when it was founded over 30 years ago. The strength of the company’s leadership team, alongside its compelling content, world-class technological capabilities and attractive financial profile means that it is very well positioned for future growth in an evolving sector on the African continent.”
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