MultiChoice BEE scheme gains R3.8bn


The value of MultiChoice SA’s empowerment scheme Phuthuma Nathi, which has a 20% stake in the company, gained as much as R3.8 billion this week on the news that Naspers would unbundle video interests
into a new group called the MultiChoice Group.

The Phuthuma Nathi scheme consists of 67.5 million shares that are held by about 90 000 black investors.

By the close of Thursday’s trade this week the scheme was valued at R9.6 billion.

The volume of Phuthuma Nathi shares traded shot up after the news of the unbundling.

The shares gained more than 60% following the news of the unbundling.

Meloy Horn, Naspers head of investor relations, said that once the Phuthuma Nathi debt was paid off, the shareholders had received R6.2 billion in net dividends since the inception of the scheme.

The Phuthuma Nathi shares were issued at R10 and by the close on Thursday they were valued at about R140.

“The Phuthuma Nathi shares have been trading at a discount because they are not freely tradable [as shares are restricted and traded only between black investors, which limits the investors in the shares],” Horn said.

Jackie Rakitla, spokesperson for MultiChoice SA, said the debt related to the Phuthuma Nathi scheme was paid off two to three years ago.

Rakitla said the company’s local staff were 80% black people and most of the companies’ executives were black too.

Under the proposed unbundling there is a plan to increase the Phuthuma Nathi empowerment stake in MultiChoice SA from 20% to 25% at zero cost to existing black investors in the scheme.

Based on the Phuthuma Nathi share price of about R87, prior to this week’s news, an extra 5% stake in MultiChoice SA would have been worth close to R1.5 billion.

Naspers announced this week that it planned to list its Video Entertainment business separately on the JSE and simultaneously unbundle the shares in this business to its shareholders.

The new company, MultiChoice Group, will include MultiChoice SA, MultiChoice Africa, Connected Video, which includes Showmax Africa, DStv Now and Irdeto.

Video Entertainment CEO Imtiaz Patel said – regarding the possibility of mergers and acquisitions – that the MultiChoice Group would look at “all options” but for now the plan was to launch the listing.

On the growth front, MultiChoice SA CEO Calvo Mawela said the company was planning to launch an internet streaming service next year that would use fibre for delivery.

“We are bullish on the prospects for the company,” Mawela said.

However, this bullishness comes amid the rise of online streaming competitors, such as Netflix and Amazon Prime.

Mawela said MultiChoice was differentiated from these competitors by “very popular local content” and sport.

Once listed on the JSE, the company is expected to create a JSE top 40 company.

MultiChoice has 13.5 million households as subscribers across Africa and employs more than 9 000 people.

Once MultiChoice Group is listed, the plan is to allow for the option of 25% of the original Phuthuma Nathi shares to be converted into MultiChoice Group shares.

She said a key issue for Naspers was to reduce the discount at which the company traded relative to the sum of all its assets.

Naspers’ major asset is a 31.2% stake in Chinese internet giant Tencent.

Naspers was valued this week at R1.4 trillion but the 31.2% stake in Tencent, which is listed on the Hong Kong stock exchange, was valued at R1.8 trillion.

“Investors are saying you need to do something to force the market to put a value on these things.

“One of the ways to do this is to list some of your assets separately,” Horn said.

The MultiChoice listing is planned for the first half of next year.

Estimated valuations by analysts and investors have ranged from $5 billion [R71 billion] to $6.6 billion, according to a report this week by Bloomberg.

MultiChoice started as a division of M-Net, which Naspers founded in 1985.

MultiChoice Africa was launched in 1996, said Bloomberg.

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