Late yesterday afternoon Naspers announced that it would be unbundling its video entertainment business and creating a new company on the Johannesburg Stock Exchange (JSE).
That company will be known as MultiChoice Group and will include: MultiChoice South Africa, MultiChoice Africa, Showmax Africa, and Irdeto.
The unbundling still needs to be approved by regulators but its expected that, in the first half of 2019, MultiChoice Group will join the JSE.
“The Video Entertainment business is an African success story. This unbundling and listing is expected to deliver value to the South African economy as well as to Naspers and Phuthuma Nathi shareholders. Naspers will continue to invest in South Africa through our interests in ecommerce businesses such as Takealot, Mr D Food, PayU, OLX, Property24, and AutoTrader SA, among others,” Naspers chief executive officer Bob van Dijk said in a press release.
As part of the unbundling process Naspers said that Phuthuma Nathi shareholders would receive an additional five percent stake in MultiChoice South Africa. This will increase dividends of Phuthuma Nathi shareholders to 25 percent.
Phuthuma Nathi shareholders will also have the option to convert 25 percent of their original shareholding into MultiChoice Group shares.
So the big question then is: why Naspers is unbundling this stock and creating a new company? The short answer, according to Imtiaz Patel, chief executive officer for the current Video Entertainment business, is profit.
“Listing and unbundling MultiChoice Group is intended to create a leading entertainment business listed on the JSE that is profitable and cash generative,” explains Patel.
Naspers goes on to say that MultiChoice Group will be unbundled with “limited leverage, providing it with the necessary financial flexibility to pursue growth opportunities in African video entertainment.”
Indeed, MultiChoice needs to become more profitable and look at how it can grow the business in an age where over-the-top services such as Netflix are taking the world by storm. Could being part of the Video Entertainment business have held MultiChoice back? We’re not sure about that but Patel says that there is room for growth at MultiChoice Group.
“There are significant growth opportunities for MultiChoice Group in Africa. The combination of MultiChoice’s reach, Showmax and DStv Now’s cutting-edge internet television service, alongside Irdeto’s 360 security suite will provide a unique offering,” concludes Patel.