Walt Disney Co and Reliance Industries (RIL) are in the final stages of negotiations to finalize their merger, creating India’s largest media and entertainment business. The deal is expected to include Viacom18 as the largest shareholder in the combined entity. Both companies are working towards reaching an agreement before the February 17 exclusivity deadline. This article provides an overview of the merger discussions and the potential implications for the media and entertainment industry in India.
Merger Details and Stakeholders:
The negotiations between Disney and Reliance have reached the final phase, with the aim of creating India’s largest media and entertainment business. Under the terms of the talks, Viacom18 is expected to become the largest shareholder in the combined entity, holding a stake of 42-45%. RIL will invest up to $1.5 billion cash in the new entity and hold a 60% ownership, while Disney will own the remaining 40%.
Reliance’s Capital Allocation Plans:
Reliance executives are currently working on a three-year capital allocation program for all businesses, which will include the media business. This indicates that the media sector will be a key part of Reliance’s growth strategy moving forward.
Viacom18 and Star India Integration:
The proposed merger involves creating a step-down subsidiary of Viacom18 Media, which will absorb Star India through a stock swap. Both businesses are valued at $4-5 billion each, with RIL expected to pay cash for the controlling stake. Jio Cinema, a part of Viacom18, will also be included in the deal.
Valuation Challenges for Disney:
Disney’s valuation of its India business has seen a significant decline since its acquisition of the Murdoch family’s sports franchise in 2019. Analysts attribute this decline to the mounting losses of Disney’s sports franchise in India. However, the merger with Reliance presents an opportunity for Disney to consolidate and strengthen its position in the Indian market.
Board Composition and Governance:
The new company resulting from the merger will be board-managed, with RIL having a majority stake. Disney is likely to have three representatives on a board of eight or nine members, including independent directors. This structure ensures a fair representation of both companies’ interests.
Frequently Asked Questions:
- When is the deadline for the Disney and Reliance merger discussions? The exclusivity deadline for the merger discussions is February 17.
- Who will be the largest shareholder in the combined entity? Viacom18 is expected to hold the largest stake in the combined entity, with 42-45%.
- How much cash is Reliance expected to invest in the new entity? Reliance plans to invest up to $1.5 billion cash in the new entity.
- What challenges has Disney faced in valuing its India business? Disney’s valuation of its India business has declined due to the mounting losses of its sports franchise in India.
How will the board composition be structured in the new company? The new company will have a board of eight or nine members, with RIL having a majority stake and Disney having three representatives, including independent directors.