Reliance Industries Ltd (RIL) and Walt
Disney Co are working on a non-binding term sheet that would open the way for
the consolidation of their operations as both companies have entered the final
stages of deal for merging media and entertainment operations in Bharat.
If the deal works accordingly, it could
position Mukesh Ambani-led RIL as the majority stakeholder in what could become
Bharat’s biggest media and entertainment business, stated a report in The
Economic Times.
Reportedly, the proposed strategy involves
the establishment of a step-down subsidiary of RIL’s Viacom18, absorbing Star
India through a stock exchange.
Reliance is planning to secure a
controlling stake of at least 51 per cent, with Disney holding the remaining 49
per cent. The negotiation also includes immediate capital investment of $1 to 1.5
billion.
Equal Representation
The board structure of the merged entity
is likely to have equal representation from Reliance and Disney, with a minimum
of two directors each.
Moreover, elucidated talks involve
granting a board seat to Bodhi Tree, the second-largest shareholder in
Viacom18. Independent directors are also under consideration.
Reportedly, key individuals involved in
the deal include Justin Warbrooke and Kevin Mayer from Disney, along with K
Madhavan, Disney’s Bharat head.
Reliance’s negotiations are led by Manoj
Modi, an essential adviser to Mukesh Ambani.
The estimated timeline indicates that
both companies may declare the merger by the end of January, following pivotal meetings
and the signing of the term sheet, said the sources in The Economic Times.
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 Bharat during
an earnings call in November.
Analysts believe 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 strengthen the overall competitiveness of the
joint venture.
NE Watch Desk
