Africa’s biggest company — Naspers Limited — is spinning off from MultiChoice, as part of a deliberate plan to refocus its business model as a global technology company.
Valuation for MultiChoice, which was founded by Naspers back in 1985, has been tentatively set at $3 billion. However, a Bloomberg report suggested that the company’s valuation may eventually be pegged at either $5 billion or $6 billion.
It should be noted that a spin-off, in corporate parlance, entails a form of divestiture whereby an independent company is created through the sale or distribution of new shares of an existing business or division of a parent company.
In this particular situation, the new and independent company that is being created is MultiChoice.
Following the spin-off announcement, MultiChoice’s shares began trading at 95.5 rands on the Johannesburg Stock Exchange. It later rose to 96.15 earlier this morning.
Naspers’ shares, on the other hand, traded at 3,069.99 rands, marking a 2.3% decline. Naspers is said to be the most capitalised company on the Johannesburg Stock Exchange, comprising a fifth of the South African bourse.
Understanding the situation
MultiChoice’s shares are forecast to be volatile in the meantime, as Naspers shareholders (who own MultiChoice’s shares anyway) make a decision on the new direction they desire for the company.
At the moment, MultiChoice continues to be Africa’s biggest pay-TV provider with its 14 million active subscribers.
Its business operation cuts across much of Africa, including Nigeria where DStv (which is owned by the company), often acts like a monopoly.
Years after Naspers founded MultiChoice, it went on (in 2001) to buy out a 31% stake in the Chinese internet firm, Tencent Holdings Limited. Almost two decades later, the shareholding is now valued at $129 billion. This sum is more than double of Naspers’ entire valuation.
It is not exactly clear how the separation between Naspers and MultiChoice will end up. But however it goes, Nairametrics will keep abreast with the latest developments.