Naspers Pay-TV Unit MultiChoice Jumps on Debut in Johannesburg

(Bloomberg) -- MultiChoice Group Ltd. soared 16 percent in debut trading in Johannesburg as the pan-African pay-TV company embarks on a new era of independence following a spin off by technology giant Naspers Ltd.

The shares traded at 111.12 rand as of 11 a.m. local time on Wednesday, valuing the company at almost 50 billion rand ($3.5 billion). That’s the biggest listing in the city since Steinhoff International Holdings NV unbundled its Africa retail operations, now known as Pepkor Holdings Ltd., almost 18 months ago. The shares first traded at 95.5 rand.

“We are happy with where the share opened and how it is trading,” MultiChoice Chief Financial Officer Tim Jacobs said in an interview at the local stock exchange. “We expect it to settle down in the next three months.”

The move creates an Africa-focused company free from Cape Town-based Naspers, which has expanded around the world since making a blockbuster early investment in Chinese giant Tencent Holdings Ltd. in 2001. MultiChoice broadcasts live sport such as English Premier League soccer, global hit dramas like Game of Thrones and locally produced content, and services about 14 million households.

New Customers

“We have identified about 40 million additional subscribers that could be signed on in the middle income and mass market,” Jacobs said. About half the company’s current customer base is in South Africa, and the focus after listing will be to accelerate growth on the rest of the continent, he said.

MultiChoice faces challenges from cheaper online alternatives -- including Netflix Inc. -- which have sprung up alongside rising African household incomes and faster internet speeds. To compete, the company is pushing its own video-on-demand service, Showmax, and a mobile app for the TV footage, the CFO said.

Naspers is seeking to realise value from its myriad of assets to help narrow the difference between its $129 billion stake in Tencent and the lower value of the company as a whole. The spin off of MultiChoice is also an attempt to reduce its dominance of Johannesburg’s stock exchange, where it made up about 18 percent of the benchmark index before the listing. The stock has declined 5.3 percent in past 12 months, valuing the company at 1.4 trillion rand.

MultiChoice’s valuation could eventually settle at about $5 billion to $6 billion, according to Bloomberg Intelligence analyst John Davies. The company has about 4 billion rand in cash and 4 billion rand in undrawn facilities, so didn’t need to raise cash from the listing, Jacobs said.

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