Why is Canal+ buying a stake in MultiChoice?
Why is Canal+ buying a stake in MultiChoice?
in partnership with FLUTTERWAVE, THE BULB AFRICA & ENDEAVOR 06.10.2020
Good morning. Every time I think about that agritech company that's taking a public beating right now, I remember Warren Buffet's famous quote; "only when the tide goes out do you discover who's been swimming naked." In today's edition: -Canal+ Group & Multichoice -Agribusiness -How big deals get done
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CANAL+ MAKES ANOTHER MOVE
France's Canal+ has acquired a 6.5% stake in Multichoice group. This might be the best headline about the deal: Is MultiChoice Group in play? It's a honest headline, because, right now, no one can tell you exactly what this decision to buy MultiChoice's shares will mean. We have a few theories, but first, here's some background. Background: Canal+ Group, which is owned by Vivendi is to Francophone Africa, what DStv is to Anglophone Africa. Although it is a French company, in 2018, a quarter of its subscribers were in Africa. When you have that kind of dominance from mostly French speaking Africa, it is natural to have bigger ambitions. Especially when Bloomberg tells you that the number of pay-TV users in Sub-Saharan Africa will double. Pan African expansion: Canal+ matched its ambitions with action. In 2019, it acquired ROK studios, the content producing arm of IROKO tv. It was a big win: Canal+ was buying a production company that had produced 550 movies and TV shows. What that deal looked like: I spoke to someone with knowledge of ROK's acquisition. He claims Canal+ was not originally the shortlisted buyer. What changed? Canal+ was an existing shareholder in IROKO tv and reportedly made a better offer than the shortlisted buyer. Now that we have some background, what could Canal+ benefit from a stake in MultiChoice?
  • Access to more original content for its audience if a partnership happens
  • While MultiChoice didn't make any disclosures, a partnership could be in the works
  • Canal+ could also continue its pan African expansion by buying MultiChoice's "Rest of Africa" business (all of MultiChoice's business out of South Africa)
AGRIBUSINESS IS UNDER THE SPOTLIGHT
If you haven't already seen it on a Twitter timeline or Facebook page, Thrive Agric has rightly been taking a bashing. First, the company defaulted on payments to investors and there was this claim that the company was reaching out to the media to "kill" these negative stories. Why did Thrive Agric's default drive such strong sentiments? Well, people had invested their hard earned monies in the hopes of guaranteed returns. The company was also trusted more than some other competitors because in 2019, it became part of YCombinator Winter Batch.

What's under the hood? To understand the business model of some of these agri-investment companies, I spoke to a source at FarmCrowdy. "Agribusiness is volatile," he tells me. Depending on what value chains you're focused on, the volatility could even be more pronounced. There are issues like farmers not meeting estimated yield levels or meeting them and stealing them for personal gain. When you have these issues and you pair them with a model that depends on raising money from a non-regulated market, you will have problems. It gets worse... Despite the problems with the model, many agritech companies offer relatively higher returns than the capital market over short tenures. It's not a model that is sustainable. How are some agribusinesses working around this? One workaround some companies use is to set up a holding company. It's about to get technical. This holding company would have controlling stake in the agric arm of the company. The holding company would also have a controlling stake in the crowdfunding platform that raises money for every any and all sectors. Stay with me here.... It would mean that the holding company can then raise money on behalf of an institutional partner (its agribusiness arm) from the market promising a certain return over a given period. After raising said money; it then grants this amount to said partner as a loan. The terms of that loan would be slightly more favorable than what they promised the market they raised money from. Bottom line: This kind of model reduces the need to promise returns in such short tenures and would enable the entity have more freedom in how the funds raised are used.
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