The Competition Commission of South Africa has approved a significant transaction in which MultiChoice is set to divest a 60% stake in its insurance subsidiary, NMS Insurance Services (NMSIS), to the renowned insurance and financial services conglomerate, Sanlam. The deal, which carries a hefty price tag of R2.7 billion (equivalent to $155.5 million), is anticipated to transform the business operations and prospects for both MultiChoice and Sanlam, creating avenues for enhanced growth and collaborative efforts.
This agreement, which was initially unveiled in June 2024, entails an immediate cash transaction where Sanlam will pay R1.2 billion ($69.1 million) upfront. Additionally, there is a provision for a performance-based earn-out of up to R1.5 billion ($86.4 million), contingent on NMSIS’s gross written premium for the fiscal year that concludes in December 2026.
The strategic benefits of this acquisition extend beyond the financial investment. Sanlam stands to gain a significant advantage by capitalizing on MultiChoice’s vast subscriber base, which spans 21 million households across 50 countries in Africa. This will enable Sanlam to broaden its insurance product distribution across the continent.
A long-term commercial agreement has been established between the two entities, granting Sanlam the opportunity to engage with MultiChoice’s diverse and extensive audience, as well as to utilize its integrated payment systems.
Calvo Mawela, the CEO of MultiChoice, has publicly recognized the partnership as a pivotal strategic development. He has emphasized the potential for this alliance to add value for subscribers and to foster innovation within the insurance market throughout Africa.
NMSIS, operating under the DStv brand, has played a crucial role in the provision of micro-insurance products, including life insurance policies such as funeral cover and subscription waivers, specifically designed for MultiChoice subscribers.
Despite relinquishing the majority share to Sanlam, MultiChoice will maintain a 40% stake in NMSIS, signifying its continued commitment to the subsidiary’s ongoing expansion and success. Sanlam is set to manage NMSIS within its fintech sector, with ambitions to scale the operations beyond South Africa’s borders through its SanlamAllianz network.
While this deal is perceived as a strategic expansion for MultiChoice’s insurance division, there are concerns among analysts regarding the overall financial stability of MultiChoice.
Recent financial disclosures from MultiChoice reveal a troubling trend, with the company’s losses escalating from R2.9 billion ($170 million) to R4.1 billion ($236.1 million) in the fiscal year ending March 2024. Additionally, the company has experienced a 9% decline in its active subscriber base, with notable reductions in both the South African and other African markets.
Some industry observers have cautioned that unless there is a substantial turnaround or a potential acquisition by the French media conglomerate Canal+, MultiChoice might be compelled to seek additional capital through a rights issue. With Canal+ already possessing a significant share of MultiChoice and proposing to offer shareholders R125 per share, the future of the broadcasting giant is shrouded in uncertainty as it contends with both regulatory challenges and mounting financial pressures.
