First published in Daily Maverick 168

Without saying there has been anything untoward in the share price’s movement, there is a sense that inside information leaks like a sieve in our market. Maybe it’s the same in France — over an espresso and a Gauloises rather than a beer next to the braai.

Be that as it may, Groupe Canal+’s interest in MultiChoice has certainly piqued the interest of the local market. What are its plans? Is a takeover possible? 

MultiChoice clearly knew the share purchases would spark a flurry of questions and it pre-empted them with a brief comment in Monday’s SENS announcement stating that its policy was not to comment on its individual shareholders or on its interactions with them. 

Groupe Canal+ was a little more forthcoming, saying the acquisition was a long-term financial investment and demonstrated its confidence, as well as its owner Vivendi in the “prospects of MultiChoice and the African continent to which they are attached”.

MultiChoice is certainly becoming more attached to its operations outside SA, given the larger number of households using its services there. But so is Canal+, the TV and film company owned by Groupe Canal+.

It broke MultiChoice’s virtual monopoly in sub-Saharan Africa when Canal+ Afrique returned to French-speaking African countries in 2012 after a 17-year hiatus to exploit an emerging market for pay TV across the continent. There are hundreds of millions of people in Francophone Africa. The Democratic Republic of Congo alone has more French speakers than France. 

MultiChoice counts 11.1 million African households outside SA as 90-day subscribers – 57% of its total subscriber base. It has been adding more local content channels too. Its focus is more on Anglophone Africa.

Canal+ Group’s acquisition of the MultiChoice stake comes as both companies face increasing competition from streaming services such as Netflix and Amazon Prime, which can be accessed a lot cheaper. One thing tying viewers to DStv is sport. The same goes for Canal+, which has a number of sports channels on its African platform. 

While there is some overlap in their operations in west Africa and a few other countries including Ethiopia, where MultiChoice has just acquired exclusive rights to broadcast Ethiopian Premier League matches, it could simply be a case of stronger together. 

Sasol winded after Lake Charles sale 

While investors were all ooh la la over MultiChoice’s new shareholder, Sasol got a cooler response to its new partner for its Lake Charles Chemicals Project in Louisiana. Its shares fell when the deal was announced a week ago, while LyondellBasell’s rallied – implying the purchaser got the better deal.

Although Sasol claims the sale of 50% of the base chemicals business at Lake Charles was at a higher price than the $3.9-billion the asset was worth at the end of June, that doesn’t translate into a great deal. Due to its dire debt situation, it was a forced sale at what one analyst said was a 30% discount to cost. And while the company says the sale means it may be able to avoid a rights issue of up to $2-billion next year, it hasn’t discounted one either.

When it announced a possible partner for the project in March, it was with the aim of generating at least $6-billion by next June to keep its bankers happy. It also recently sold its oxygen production site in Secunda to French group Air Liquide for about R8.5-billion ($515-million). That means it still has some way to go to meet its target. 

At last count, Sasol had spent $12.8-billion on Lake Charles, well above the $8.9-billion investment that was approved for the project in 2014. Along with other chemicals companies, it wanted to use cheap US shale gas as feedstock for the plant. Things haven’t gone according to plan. Covid-19 and a big slump in the oil price this year came just when it was in peak gearing phase as it completed the project. 

With LyondellBasell looking after the base chemicals business, Sasol is now free to focus on performance chemicals and energy under its Future Sasol strategy, aimed at positioning the group for sustained profitability in a low oil price environment. It’s being driven by Fleetwood Grobler, who replaced former joint CEOs Bongani Nqwababa and Stephen Cornell after they took the fall for Lake Charles in 2019. 

The company’s share price has yet to reflect the market’s confidence in Future Sasol.

Time to sell the farm?

Should Zeder Investments call it a day after this year’s sale of its stakes in Pioneer Food Group and Quantum Foods? Some analysts certainly believe so, given its diminished size and the big discount it trades at relative to its investments.

It’s also something the investment group is mulling over, perhaps under pressure from large shareholder PSG.

CEO Norman Celliers wasn’t around to host this week’s webcast and conference call on its interim results after he quit last month pari passu with the investment group’s announcement of a possible change in direction. Instead, acting CEO and chief financial officer Johann le Roux reiterated the group’s commitment to create value for shareholders either through share price growth, dividends or the return of capital. 

With Pioneer and Quantum gone, Zeder’s portfolio has shrunk in value from more than R10-billion in February to less than R6-billion at the end of August. It’s left with just five investments and a big chunk of cash after buying back some of its shares and dishing out a special dividend to shareholders. Of these, four are unlisted, including Agrivision Africa, whose value has continued to dwindle, down to R155-million from R242-million a year ago. Go back a few years and the business was valued north of R600-million. Its remaining listed investment, Kaap Agri, is also worth close to R100-million less than it was back in February due to weakness in its share price. 

Apart from its almost 100% stake in seed business Zaad, Anthony Clark of Smalltalk Daily Research believes there is nothing of consequential value in the portfolio. He blames the 35% discount the share trades at relative to its sum-of-the-parts value (which widens to 43% if you exclude its cash) on the lack of transparency in the unlisted investments and a lack of investor appetite for the highly cyclical agriculture industry. In May, he said the discount reached 67%.

With R1.05-million in cash, Clark believes Zeder would be better off broken off, with the assets sold and cash returned to shareholders. This, he says, would also be a good outcome for 47% shareholder PSG as it tries to reinvigorate its portfolio following the unbundling of most of its stake in Capitec in September and closes the discount of its own shares trade at relative to the value of its investments. BM/DM