MultiChoice rolls snake eyes on R6-billion bet

MultiChoice has lost a tremendous amount of money after investing nearly R6 billion in Blue Lake Ventures, which traded as BetKing and recently changed its name to KingMakers. KingMakers, headquartered in Nigeria, specialises in sports betting and entertainment with ambitions to expand throughout Africa.

In 2020, the company bought a 20% shareholding in BetKing for an upfront investment of $81 million (R1.4 billion) paid in cash and $31 million (R500 million) in potential earn-out targets.

MultiChoice announced that the $31 million payment had been triggered, making the total amount payable for the 20% stake equal to $112 million (R1.9 billion). In 2021, MultiChoice increased its shareholding in KingMakers to 49% by acquiring the additional 29% for $281.5 million. The total consideration for MultiChoice’s 49% stake in KingMakers was, therefore, $393.5 million dollars — equivalent to around R5.9 billion.

MultiChoice said its 49.23% voting interest is fully diluted for KingMakers but represents a 51.23% economic interest. MultiChoice explained that it owns 49.23% of the business. However, due to an IFRS requirement, the economic ownership is considered to be 51.23%. This is due to the sale of shares to the KingMaker’s share scheme, which was considered to be the issuance of an option liability.

MultiChoice’s investment in KingMakers

MultiChoice said sports betting creates a natural extension to the MultiChoice video entertainment platform to further enhance its product set.

“The global sports betting market is experiencing a growth surge. Africa comprises only 2% of global sports betting revenue and is poised for significant momentum as it plays catch-up,” – it said.

It added that KingMakers 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 MultiChoice’s regional presence and acumen. It sounded like a fantastic deal on paper, but the challenges of growing a business in Africa quickly became clear.

KingMakers did not live up to its promise. It managed to increase its revenue, but the cost associated with this growth was much higher than anticipated. As revenue increased, the company’s profits have done the opposite. Since the MultiChoice acquisition, KingMakers’ losses have grown to a record high. In the last financial year, KingMakers recorded a loss after tax of $28 million (R500 million).

MultiChoice blamed the record loss on investment to further scale the business and cash extraction losses out of Nigeria, which amounted to $13 million. Its expansion plans also did not work as expected, and KingMakers exited operations in Kenya and Ethiopia.

MultiChoice announced in its latest results that an increase in the discount rates in Nigeria prompted a R2 billion write-down in the value of KingMakers. MultiChoice stated that its current 51.23% stake in KingMakers was now valued at R4.6 billion following the write-down.

In simple terms, it means that MultiChoice has lost around R1.3 billion on its investment in KingMakers. Looking at the financial performance of KingMakers, it is not difficult to see why the write-down was done.

The KingMakers investment has not created any value for MultiChoice investors, and its performance since the acquisition has not been encouraging.


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