South Africa’s Competition Commission has approved a significant transaction that allows MultiChoice to sell 60% of its insurance subsidiary, NMS Insurance Services (NMSIS), to the leading insurance and financial services provider, Sanlam. The deal, valued at an impressive R2.7 billion (approximately $155.5 million), marks a pivotal moment for both companies, creating new pathways for growth and collaboration within the African insurance and financial services sectors.
Details of the MultiChoice-Sanlam Deal
The transaction was initially announced in June 2024, with details now emerging about the financial structure of the deal. Sanlam will make an upfront cash payment of R1.2 billion ($69.1 million), with the potential for an additional R1.5 billion ($86.4 million) in an earn-out clause. This earn-out will be contingent on NMSIS’s gross written premium for the financial year ending December 2026.
Expansion Across Africa
Beyond the financial exchange, the partnership holds enormous potential for the expansion of insurance offerings across Africa. Sanlam aims to leverage MultiChoice’s vast subscriber base, which includes 21 million households across 50 African countries, to introduce new insurance products and services. This will be further facilitated by the long-term commercial arrangement between the two companies, allowing Sanlam access to MultiChoice’s extensive payment systems and diverse audience.
Strategic Importance of the Deal
Speaking about the partnership, Calvo Mawela, CEO of MultiChoice, highlighted the strategic importance of the transaction. He described it as a “strategic milestone” that will not only enhance value for subscribers but also drive innovation in the continent’s insurance sector. According to Mawela, this move will improve the offerings provided to MultiChoice’s DStv subscribers, ensuring more tailored insurance products and services.
NMSIS, operating under the DStv umbrella, has become a crucial player in the African micro-insurance market, offering products such as funeral cover and subscription waivers to its subscribers. The deal with Sanlam will likely enhance the reach and scope of these offerings.
Ownership Structure Post-Transaction
While Sanlam will take a 60% controlling stake in NMSIS, MultiChoice will retain 40% ownership. This ensures that MultiChoice remains deeply invested in the future growth and success of the insurance business, even as Sanlam assumes control of the day-to-day operations.
Sanlam’s Strategic Expansion Plans
Sanlam will manage the operations of NMSIS through its fintech cluster, with ambitious plans to expand NMSIS’s offerings beyond South Africa. The company is particularly keen on penetrating other African markets through its partnership with SanlamAllianz, a venture that combines the resources of Sanlam and Allianz to drive fintech and insurance growth in emerging markets.
Financial Pressures Facing MultiChoice
Despite the positive outlook on the insurance front, MultiChoice is facing significant financial challenges. The company’s most recent financial results have shown an alarming rise in losses, increasing from R2.9 billion ($170 million) to R4.1 billion ($236.1 million) for the fiscal year ending March 2024. This downturn is coupled with a 9% drop in active subscribers, with substantial declines in both the South African and Rest of Africa markets.
Canal+ and the Future of MultiChoice
The financial struggles of MultiChoice have led to speculation about the company’s future, with some analysts warning that a buyout by Canal+ or a capital raise through a rights issue may be necessary. Canal+, a French media giant, already holds a significant stake in MultiChoice and has offered shareholders R125 per share. However, the broadcaster’s future remains uncertain as it deals with regulatory hurdles and ongoing financial pressures.
Outlook for the Future
While the sale of NMSIS to Sanlam represents a bold step toward strengthening MultiChoice’s financial position, the company will need to address its broader financial woes to remain competitive in the media industry. With the insurance deal in place, MultiChoice is positioned to benefit from Sanlam’s expertise and resources, particularly in the rapidly growing African market. However, the question remains whether this strategic partnership will be enough to stabilize MultiChoice’s financial health in the long term.
As both MultiChoice and Sanlam look toward the future, this transaction has the potential to reshape not only their businesses but also the landscape of insurance and financial services across Africa.
