In October 2020, MultiChoice acquired a 20% shareholding in Blue Lake Ventures Limited, a pan-African sports betting and entertainment business trading as BetKing.
Shareholders are advised that MultiChoice, through its wholly-owned subsidiary, Mwendo Holdings B.V. (Mwendo), is increasing its holding in BetKing to a non-controlling stake of 49%, in line with its strategy to expand its entertainment ecosystem and develop meaningful drivers of future value.
Principal terms of the Transaction and transactional steps
The Transaction consists of three transactional steps:
- The creation of a BetKing employee share option plan (“ESOP”). 10% equity in BetKing will be allocated to the ESOP, with equal dilution across all current BetKing shareholders to fund the equity allocation. MCG’s shareholding will consequently reduce from 20% to 18%.
- The acquisition of a 9.6% stake in BetKing for USD100m by Mwendo as part of an equity raise to fund BetKing’s expansion and medium-term business plan, resulting in MCG’s shareholding in BetKing increasing to 27.6%.
- The acquisition by Mwendo of a 21.4% stake in BetKing from partially-exiting minority shareholders for USD181.5m, which is at the same valuation as the equity issuance, resulting in MCG’s shareholding in BetKing to increase to 49%.
Steps 2 and 3 will occur concurrently, after the allocation of the ESOP shares. The total Transaction consideration, which amounts to USD281.5m, will be debt-funded.
As a result of the above Transaction, the Agterskot (earn-out) from the original 20% investment transaction concluded in October 2020 will be triggered and a further USD31m will be payable. This will require MCG to raise R4.0bn in ZAR-denominated debt, a condition precedent to the Transaction.
The rationale for the Transaction
Consumers have a growing abundance of entertainment options available to them. It is therefore important for MultiChoice to maintain its relevance and grow its share of engagement time and consumer spending by expanding its entertainment platform with a more comprehensive offering and a greater number of products and services.
Pursuing an adjacency such as sports betting creates a natural extension to the MultiChoice video entertainment platform to further enhance its product set. Well established in Europe and fueled by its legalisation in the USA in 2018, the global sports betting market is currently experiencing a surge in growth.
According to a recent report by Technavio, it is set to grow by more than USD134bn between 2020 and 2024, representing a CAGR of 10%. As Africa currently comprises only 2% of global sports betting revenue, it is poised for significant momentum as it begins to play catch up.
By leveraging its own proprietary technology which allows it to adapt to the unique challenges of each market, BetKing is particularly well-positioned to capture a large share of the African growth opportunity.
It will also benefit from SuperSport’s strong brand and reach across the continent, as well as MCG’s regional presence and acumen. BetKing will use the proceeds of the capital raised to expand its product set and geographic footprint to more markets on the continent.