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.
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