The antitrust watchdog cleared the MultiChoice-Sanlam deal.
The Competition Commission has approved the sale of 60% of MultiChoice’s insurance business, NMS Insurance Services (NMSIS), to Sanlam.
NMSIS is a micro-insurance provider that offers insurance products to MultiChoice’s DStv customers.
Its products include life insurance offerings like funeral cover and subscription waivers.
The Commission approved the acquisition without conditions, saying it was unlikely to substantially lessen or prevent competition in any market.
MultiChoice and Sanlam first announced the deal in June 2024.
Sanlam will pay R1.2 billion cash upfront, with a potential performance-based cash earn-out of up to R1.5 billion.
The earn-out is contingent on the amount of gross written premium generated by NMSIS for the financial year ending 31 December 2026.
The agreement also includes a long-term commercial arrangement to expand insurance and related financial service offerings into MultiChoice’s extensive African subscriber base.
MultiChoice said the proceeds from the transaction will be used for working capital.
It also said that it retains a substantial 40% stake in the business, allowing it to continue benefiting from this segment’s high growth potential while maximising value for its shareholders.
“Through this commercial arrangement, Sanlam and its affiliates have the opportunity to cross-sell financial services products to MultiChoice’s extensive and engaged subscriber base of 21 million households across 50 African countries,”
MultiChoice stated.
“Sanlam will leverage MultiChoice’s engagement channels and integrated payment collection capabilities to deliver these broader offerings to MultiChoice’s subscribers.”
Opportunities outside of South Africa will be facilitated through SanlamAllianz, MultiChoice stated.
“This collaboration with Sanlam is a strategic milestone for MultiChoice,”
said MultiChoice CEO Calvo Mawela.
“It not only allows us to increase the value we provide to our subscribers, but also enables us to leverage Sanlam’s expertise to drive growth and innovation in our insurance offerings across the continent.”
NMSIS is a registered South African composite micro-insurer and authorised financial services provider, licensed to underwrite non-life and life insurance products.
It has been writing insurance for the past 20 years under the DStv brand of MultiChoice, focusing on device, installation, funeral, subscription waiver, and debt waiver insurance products.
NMSIS’s key financials for the year ended 31 March 2024 were as follows:
- Gross written premium increased 36% year-on-year to R970 million
- Profit after tax increased 51% to R296 million
- Net asset value of R277 million
Sanlam will oversee the NMSIS operations through its Sanlam Fintech cluster.
Several analysts have raised concerns about MultiChoice selling a majority stake in one of its profitable assets to cover operational costs.
MultiChoice and Sanlam announced the deal shortly after the pay-TV operator reported a dismal set of financial results for the year ended 31 March 2024.
Analysts described the results as “truly awful” and “scary”.
The broadcaster’s loss for the year increased from R2.9 billion to R4.1 billion, and had become technically insolvent.
It suffered a 9% decline in active subscribers, including a 13% decline in the Rest of Africa business and a 5% decline in South Africa.
Wayne McCurrie from FNB Wealth and Investments described MultiChoice’s latest results as awful.
McCurrie’s comments echoed those of Shane Watkins from All Weather Capital, who warned that the results might be even worse than the numbers suggest.
“There are lots of profits in the numbers which are artificial,” he stated. “MultiChoice pushed between R1 billion and R2 billion of Showmax costs to next year, and decoder subsidies are R2.2 billion less than last year,”
he said.
He said MultiChoice pulled back on the subsidies due to poor trading conditions.
There is also another R1.5 billion in once-off foreign exchange contract profits, which is unlikely to be repeated.
Watkins said unless it is bought by Canal+ or dramatically improves its operations, MultiChoice will need to raise capital through a rights issue.
French media giant Groupe Canal+ has offered MultiChoice shareholders R125 per share.
It already owns well above 40% of MultiChoice and has been compelled by law to offer to buy the rest of the shares.
Although the deal is likely to go through, it is not certain.
It faces regulatory hurdles, including approval from the Independent Communications Authority of South Africa (Icasa) and the Competition Commission.
The companies announced at the end of September that they made a made a joint merger control filing to the Competition Commission and were engaging other regulators, including Icasa.
Source: Mybroadband
