Reliance Industries Ltd (RIL) and Walt Disney Co. are in the final stages of negotiations for merging media and entertainment operations in India, The Economic Times reports.
The business daily, quoting reliable sources close to the developments, states that the companies are working on a non-binding term sheet that would pave the way for the consolidation of their operations.
If successful, this deal would position Mukesh Ambani-led RIL as the majority stakeholder in what would become India’s largest media and entertainment conglomerate.
The proposed plan involves the creation of a step-down subsidiary of RIL’s Viacom18, absorbing Star India through a stock swap, as per the people quoted in the ET report.
Reliance aims to secure a controlling stake of at least 51 per cent, with Disney holding the remaining 49 per cent. The negotiation also includes a cash injection of $1-1.5 billion as immediate capital investment.
Equal representation
The board structure of the merged entity is expected to have equal representation from Reliance and Disney, with a minimum of two directors each.
Additionally, discussions involve granting a board seat to Bodhi Tree, the second-largest shareholder in Viacom18. Independent directors are also under consideration.
According to ET, key individuals involved in the negotiations include Justin Warbrooke and Kevin Mayer from Disney, along with K Madhavan, Disney’s India head.
Merger likely by end of January 2024
The anticipated timeline suggests that both companies may announce the merger by the end of January, following crucial meetings and the signing of the term sheet, the sources quoted in the ET report added.
Confirmatory due diligence and the valuation exercise will follow, with a five-year licence for exclusive subscription video-on-demand (SVOD) content from Disney+ expected to be part of the agreement.
Walt Disney CEO Bob Iger expressed the company’s interest in staying and strengthening its position in India during an earnings call in November.
Analysts suggest that this merger could provide cost and revenue synergies, transforming the value of the combined businesses in the longer term.
Both Viacom18 and Star India have faced challenges in their financial performance, with Viacom18 reporting a significant drop in net profit for FY23, while Star India’s consolidated net profit declined by 31 per cent. The merger is seen as an opportunity to address these challenges and enhance the overall competitiveness of the joint venture.
