Controversial consultancy fees paid to select members of the MultiChoice board will be reviewed and are likely be scrapped, new board chair Elias Masilela told Business Times.
The special arrangements saw three members of the board, including former chair Imtiaz Patel, paid consultancy fees for providing professional advisory services, which the board justified at the time as costing less than seeking those services elsewhere.
However, Kgomotso Moroka’s arrangement that saw her pocket R1.5m in consultancy fees was terminated last year when shareholders started asking questions.
The consultancy agreement with another board member, Jim Volkwyn, who was paid R5.1m, continues.
Patel’s decision to step down was based on the milestones that were achieved in the past three weeks, including the firm offer from Canal+
— Elias Masilela, MultiChoice board chair
Patel — who the board announced this week would no longer continue as chair — had a special arrangement that saw him pocket $1.1m (R20m) last year for restraint of trade and “provision of various strategic and advisory support services to the group at a global level”.
Patel stepped down as chair just three weeks after MultiChoice said he would remain at the helm to oversee a takeover bid by French company Canal+, which this week increased its stake to 41.6%.
“Everything has a sunset clause. These were legacy contracts that were necessary for the company because we know that when you employ board members, you employ people who are experts in their own fields as it may be quicker to get an answer from them on a technical aspect rather than getting that from the outside [which] can take longer,” Masilela said.
He was adamant, however, that this type of contract was not unique to MultiChoice.
Africa's biggest pay-TV operator said the fee structure for non-executive directors was designed to ensure it attracts, retains and appropriately compensates a diverse and experienced board.
“Non-executive directors receive an annual fee as opposed to a fee per meeting, which recognises their ongoing responsibility to ensure effective governance of the group,” the company said.
Masilela, who joined the MultiChoice board in 2018, defended the reversal of the decision to allow Patel to continue.
Business Times reported two weeks ago that the matter was debated extensively at an explosive board meeting on March 28, with some board members initially doubting the correctness of the decision. At that meeting it was announced Masilela would deputise Patel.
However, in a surprise move on Tuesday, the board announced Patel had resigned with immediate effect. It claimed progress had been made and the Canal+ takeover process was no longer in the hands of the full board but was now being managed by a separate “independent board”, alongside Standard Bank as an independent expert to review the terms of the Offer and to provide an independent expert's fair and reasonable opinion.
Masilela said Patel’s decision to step down was based on the milestones that were achieved in the past three weeks. These include the firm offer from Canal+, the signing of a co-operation agreement and the appointment of an independent board to assess the offer.
“There was a business imperative that required us to delay his retirement. But we couldn't say at that stage why we were doing so as confidential discussions were already under way with Canal+ and neither party knew how long discussions around those three critical matters would take.”
This week, Canal+ continued buying MultiChoice shares on the open market, raising its stake to 41.6%. The French company started buying the shares about four years ago. In late January it made an offer of R105 per share, which the MultiChoice board rejected. A few weeks later it upped its stake to 35%, triggering a mandatory offer to other shareholders.
If we want to grow faster and shorten the time for us to reach the level of growth we want, given competition and rapid technological changes, we have to bring in a partner
— Elias Masilela
Masilela said when Canal+ started buying shares the board kept an eye on the process as the market needed to be updated when it passed the 5% ownership mark. It was only when the French broadcaster acquired 15% that “we realised that there could be something here, because in our mind they are a competitor, and what does this whole thing mean? So we asked questions and the responses were that it is just a portfolio investment. Then the stake kept on increasing. We may not have had an engagement with them about where they were going to, in detail. But we observed and asked questions.”
Peter Takaendesa, head of equities at Mergence, said Canal+ was likely to continue buying MultiChoice shares on the market for as long as the share price is below R125 and their shareholding remains below 50%.
“It makes financial sense to buy as much as they are allowed to at a price below their formal offer of R125,” he said. Going above the R125 level would automatically lift their offer price, so they were unlikely to do so before receiving required regulatory approvals.
“Our understanding is that they will also not be able to legally exceed the 50% shareholding level without receiving the required competition authority approval, among other potential issues that may be triggered and have not yet been tested in the market. In addition to the above, the continuing pace of share purchases by Canal+ suggests that they want to complete this transaction as soon as regulatory approvals allow them to do so,” Takaendesa said.
Masilela said while MultiChoice had grown substantially in the past few years throughout the continent and had embraced new technologies, including streaming services with the relaunched Showmax platform, partnerships would be key to achieving future growth.
“Competition was stepping up their access to the continent. So the role of partnerships for me is extremely important for MultiChoice. If we want to grow faster and shorten the time for us to reach the level of growth we want, given competition and rapid technological changes, we have to bring in a partner.”
It has been reported that Canal+ is in discussions with Patrice Motsepe about joining its bid as a BEE partner. Motsepe’s African Rainbow Capital is a shareholder in Sanlam, where Masilela is chair. However, Masilela has said he would step down from Sanlam. He said the decision was taken last year when he agreed to be MultiChoice’s chair and had nothing to do with speculation of Motsepe being in talks with Canal+.
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