Reliance Industries Ltd (RIL) and Walt Disney Co. are reportedly in advanced talks to create a substantial merger within India’s media and entertainment sector, potentially forming the largest conglomerate in the country. According to sources close to the negotiations, both entities are in the process of finalizing a non-binding term sheet to pave the way for the merger.
The proposed strategy revolves around establishing a subsidiary under RIL’s Viacom18, incorporating Star India through a stock swap. In this arrangement, Reliance aims for a controlling interest in the merged enterprise, seeking a majority stake of at least 51%, with Disney retaining a residual 49%. The deal is expected to involve a significant cash component from RIL to secure this controlling interest.
Key to the negotiations is a substantial immediate capital injection, anticipated to range between $1-1.5 billion. This financial element is crucial in shaping the final shareholding structure and determining the entity’s overall value based on cash contributions from both parties.
The merged entity’s board composition is expected to ensure equal representation from both Reliance and Disney, likely appointing a minimum of two directors from each corporation. Additional representation from Viacom18’s major shareholder, Bodhi Tree led by Uday Shankar, is anticipated, along with considerations for independent directors.
Key figures involved in the talks from Walt Disney Co. include Justin Warbrooke and Kevin Mayer, alongside K Madhavan, Disney’s India head, and advisory support from The Raine Group. On Reliance’s side, negotiations are spearheaded by Manoj Modi, Ambani’s key adviser, with support from the group’s M&A team.
The timeline for announcing the merger is expected to accelerate after the signing of the term sheet, with a potential announcement as early as the end of January. This would be followed by confirmatory due diligence and a comprehensive valuation exercise conducted by independent valuers.
As part of the collaboration, Walt Disney Co. is poised to grant the joint venture company an exclusive five-year license for subscription video-on-demand (SVOD) content, featuring Disney+ originals and its extensive library. Additional terms include a five-year lock-in period, preventing engagement with competitors and providing access to distribution channels and Jio Platforms under agreed conditions.
Financial insights from Viacom18 and Star India’s filings with the Registrar of Companies present a mixed picture. Viacom18 reported a significant drop in net profit for FY23, while Star India experienced a decline in consolidated net profit but saw a rise in operating revenue, solidifying its position as the largest traditional media and entertainment entity in India.
Novi Digital Entertainment, the entity behind Disney+ Hotstar, witnessed a surge in revenue but also a substantial increase in net loss amidst ongoing consolidation efforts with its parent company, Star.
