Investors in the Phuthuma Nathi B-BBEE scheme stand to score in a big way from the proposed unbundling of MultiChoice and other related business from Naspers.
This was clear from the excitement of Phuthuma Nathi share price during the course of the day. The share price had gained more than 30% by early afternoon to trade at R117.00 up from the previous day’s close of R88.50 on the back of the Nasper’s announcement.
Naspers announced today the intention to unbundle its Video Entertainment business ans list it separately on the Johannesburg Stock Exchange (JSE). The new Video Entertainment business will be made of MultiChoice South Africa, MultiChoice Africa, Showmax Africa, and Irdeto. The reformed and separately JSE listed business will be named MultiChoice Group.
This will see Naspers distribute the shares of the separately listed MultiChoice Group to its shareholders and increase for free the stake held by Phuthuma Nathi in the new separately listed business.
Naspers CEO Bob van Dijk says “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 Naspers announcement said the proposed transaction is expected to create further value for MultiChoice’s broad-based black economic empowerment (BBBEE) scheme Phuthuma Nathi.
The announcement added that in recognition of Phuthuma Nathi’s support over the years, and to underline its commitment to transformation in South Africa, Naspers intends to allocate – for no consideration – an additional 5% stake in MultiChoice South Africa to Phuthuma Nathi shareholders, prior to the unbundling. This will increase MultiChoice Group’s BBBEE shareholding.
This means that the Phuthuma Nathi shareholders’ interest in MultiChoice South Africa and its dividend flows is expected to increase by 25%. The additional 5% stake in MultiChoice South Africa to Phuthuma Nathi shareholders is designed to reinforce MultiChoice Group’s commitment to broad-based black economic empowerment, increase Phuthuma Nathi’s upside in future value creation, and ensure continued compliance with regulatory requirements post unbundling.
The announcement added that after listing and subject to obtaining the necessary Phuthuma Nathi board and shareholder approvals, it is the ambition of MultiChoice Group to enable 25% of the Phuthuma Nathi shareholders’ original shareholding (i.e. before the allocation of the additional 5%) to be exchanged for MultiChoice Group shares that will be freely tradeable, thereby unlocking incremental value for Phuthuma Nathi shareholders.
The transaction promises to be a great boon for Phuthuma Nathi investors who have already enjoyed benefits of one of the most successful B-BBEE schemes in South Africa. The scheme has already created about R12 billion in value.
Nasper’s Video Entertainment CEO Imtiaz Patel said: “Listing and unbundling MultiChoice Group is intended to create a leading entertainment business listed on the JSE that is profitable and cash generative.
Naspers’ Video Entertainment is a fast growing business made of a revenue base of of R47.1 billion and trading profit of R6.1 billion. It employs more than 9,000 people spread across the African continent.
The Nasper’s announcement said the MultiChoice Group is expected to be unbundled with limited leverage, providing it with the necessary financial flexibility to pursue growth opportunities in African video entertainment. “Africa is one of the fastest-growing continents by both GDP and population, its middle-class is rapidly expanding and the penetration of video entertainment is still relatively low. The business is also positioning itself for the future by offering online streaming services, including Showmax and DStv Now.”