Naspers unbundles to ‘unlock value’

One of the continent’s fastest growing pay-TV operators is expected to be listed separately on the JSE by the first half of 2019.

In one stroke, global internet and entertainment group Naspers announced on Monday that it intended to list its video entertainment business separately on the stock exchange and unbundle the shares in that business to its shareholders.

Naspers and the MIH Holdings Group hold an 80% stake in satellite television subsidiary MultiChoice South Africa Group. The remaining 20% is help by Phuthuma Nathi (PN) broad-based black economic empowerment (BBBEE) shareholders.

The move is expected to add value to Naspers and Phuthuma Nathi and “deliver value to the South African economy”.

The decision follows a desire to penetrate the continent’s video entertainment market. The company also seeks to position itself for the future by offering online services — Showmax and DStv Now. According to Monday’s statement, Africa is one of the fastest-growing continents by both gross domestic products and population.


“Its middle-class is rapidly expanding and the penetration of video entertainment is still relatively low,” the statement noted.

Competition has steadily increased for MultiChoice. It noted that in 2005, there was only one platform, television, and four national broadcasters (SABC, DSTV, MNet and eTV). Today, there are multiple platforms with over 20 audiovisual media services (including Openview HD, Netflix, Showmax, Amazon Prime, Kwese, DSTV, Hulu, YouTube, Facebook, Apple TV and Google Play Movies and TV).

MultiChoice subscriptions have been under pressure, Nesan Nair, Senior Portfolio Manager at Sasfin Securities, told news channel CNBC Africa.

According to Nair, in order for the video entertainment business to remain relevant in light of this competition, it will have to produce content that appeals to a local audience on its streaming platform Showmax.

In Naspers’ financial statement ending March 2018, it noted its “stable” performance adding over one-million direct-to-home subscribers and 520 000 digital terrestrial television subscribers.

Naspers’ video entertainment business entertains 13.5 million households across the continent, and in the last financial year the business added 1.5 million subscribers, generating R47.1-billion in revenue and R6.1-billion in trading profit.

In the process, a new company, MultiChoice Group, will be formed. It will included MultiChoice South Africa, MultiChoice Africa, Showmax Africa, and Irdeto.

Naspers CEO Bob van Dijk said the move is a significant step: “This marks a significant step for the Naspers Group as we continue our evolution into a global consumer internet company.

“Listing MultiChoice Group via an unbundling aims to unlock value for Naspers shareholders and at the same time create an empowered, top 40 JSE-listed African entertainment company.”

The transaction is expected to create added value for the Phuthuma Nathi and ensure the company’s continued compliance with regulatory requirements post unbundling.

Phuthuma Nathi and Phuthuma Nathi 2 have created R12-billion in value since 2006 and 2007 respectively. An additional 5% will be allocated to Phuthuma Nathi prior to the unbundling to reinforce MultiChoice’s Group to broad-based black economic empowerment.

The share schemes, Phuthuma Nathi and Phuthuma Nathi 2, are “mirror images of each other” according to its website as both hold interests in MultiChoice.

According to the statement, this means that Phuthuma Nathi shareholders interest and its dividend flows are expected to increase by 25%. Phuthuma Nathi is currently a level one BBBEE company with over 90 000 black shareholders, which comprise of individuals, stokvels and black-owned companies.

BBBEE is measured on four categories: ownership, management control, skills development, enterprise and supplier development and socio-economic development.

To date, Phuthuma Nathi 1 was valued at 8850c while Phuthuma Nathi was valued at 8160c. The Naspers Limited group has 8.23 earnings per share.

After the listing, and following Phuthuma Nathi board and shareholder approvals, the MultiChoice Groupe hopes to enable 25% of the Phuthuma Nathi original shareholding to be exchanged for MultiChoice Group shares that will be freely tradeable, “thereby unlocking incremental value for Phuthuma Nathi shareholders”.

MultiChoice believes that by listing the Video Entertainment business separately on the JSE, the move, Video Entertainment CEO Imtiaz Patel said, will be both “profitable and cash generative”.

“We offer an unmatched selection of local and original content, as well as a world-class sports offering. Our leadership team is diverse, experienced and well-positioned to take the company forward. I am particularly pleased that this transaction will further enhance the value for Phuthuma Nathi shareholders.”

Naspers’ Video Entertainment business employs 9 000 people across Africa and its partners and suppliers create economic prosperity, indirectly, for over 20 000 people.

Although Video Entertainment will be listed separately, Naspers will continue to invest in South Africa through its interests in ecommerce businesses such as Takealot, Mr D Food, PayU, OLX, Property24, and AutoTrader SA, among others. The company will keep its listing on the JSE and its interests in Media 24.

According to Nair, “Naspers used MultiChoice as their cash cow for many years to make the investments in the the internet companies they did.”

In March this year, Naspers sold its 2% stake in the messaging company Tencent for almost $10-billion to fund its internet growth. The move followed Tencent’s $51-billion drop in value over two days. Naspers’ reduced its holding from 33.2% to 31.2%. According to Forbes, this was the first time in 17 years that Naspers had sold Tencent shares.

Following Naspers’ Annual General meeting in August, it promised to accelerate the growth of its classifieds, online food delivery, payment and global fin tech businesses for the financial year 2019. It will also plans to source all of its revenue from internet and e-commerce business (it had previously generated 80% of its revenue from these sources) by focusing on “innovation, particularly in the area of machine learning, navigating macroeconomic headwinds and managing costs in mature businesses.”

The former parent company will retain its primary listing on the JSE and its interests in Media 24.

Subject to the approval of regulatory bodies, MultiChoice Group is expected to be listed on the JSE and unbundled by the first half of 2019.

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