Disney and Reliance reach final wrap in merger talks
Under the terms of the talks, Viacom18 is expected to become the single largest shareholder with a 42-45% stake in the combined entity, they said.
Parent company RIL is expected to invest up to $1.5 billion in cash in the new entity and also directly acquire the stake. As a group, Mukesh Ambani-led RIL will own 60% and Walt Disney will own the remaining 40%.
Reliance management is also preparing a three-year capital allocation program for all companies, which could soon be presented to the board of directors. The people cited above said the media business will be a key part of its growth plans.
The current proposal is to create a phased subsidiary of Viacom18 Media that would absorb Star India through a share swap, they said. RIL will pay cash for the controlling stake as both the companies are treated as similarly sized companies and are valued at $4-5 billion each.
desire for integrationThe deal will include Jio Cinema, part of Viacom18. The valuation of Disney’s India operations has fallen sharply from levels it had anticipated when it acquired the Murdoch family’s crown jewel in 2019. This is mainly due to increased losses. Analysts said it is one of Disney’s sports franchises in India.
Viacom18’s domestic entertainment network is a partnership between Ambani’s TV18 Broadcast, Paramount Global and Bodhi Tree Systems.
The latter is an investment fund founded by James Murdoch and former Disney India CEO Uday Shankar. Bodhi Tree, a shareholder of Viacom18, will be an indirect shareholder of the new entity, contrary to reports, a company executive involved said.
ET first reported on December 25 that the two sides had signed a non-binding agreement. Previously, on December 12, the details of the joint venture being pursued by both sides were reported for the first time.
A Disney India spokesperson declined to comment. An email sent to Reliance went unanswered as of press time.
A company official said, “The Big 4 law firms, multiple law firms, and company executives are working hard on both sides and are working hard to finalize the matter.” “The deadlines can be mutually extended if desired, but both sides have the support of their top leadership to resolve all differences and get everything done by the end of the financial year. The Indian media landscape is fluid and we want to join forces and integrate as quickly as possible.”
The new company will be managed by a board of directors, in which RIL will hold a majority. Disney may also appoint three members from its board of eight or nine members, including independent directors.
turn the corner
In its recent first-quarter earnings call, Disney said that the ICC Men’s Cricket World Cup 2023 held in India led to a 144% surge in operating losses for its India unit’s sports business to $315 million for the quarter ended December 2023. The operating loss for the corresponding quarter of the previous financial year, which included the ICC Men’s T20 World Cup 2022, amounted to $129 million. This is a small event compared to the 50-over World Cup, ET reported on February 9. September annual financial calendar.
However, Disney+Hotstar, the video streaming service owned by the Burbank, California-based company, saw its paid subscribers grow for the first time since losing digital rights to the Indian Premier League (IPL) last year. Paid users in the first quarter increased 2% to 38.3 million from 37.6 million at the end of the September quarter, but core Disney+ subscribers fell 1% to 46.1 million. The Disney+Hotstar service has seen its subscriber base steadily decline in recent months after losing IPL digital rights to Viacom18 last year.
Disney CEO Bob Iger said the latest results proved the media giant had “turned a corner and entered a new era.”
Iger has been engaged in a proxy war with Nelson Peltz’s Trian Partners and Blackwells Capital, which are seeking board seats and other changes with the aim of boosting the stock price. The stock rose 11.5% on February 8 to hit a one-year high of $110.54, the biggest daily gain since November 2020, and is up about 22% in 2024. This followed better-than-expected quarterly results and the announcement of several plans to reassure shareholders, including a $3 billion share buyback and a 50% dividend increase.
Iger also announced a $1.5 billion investment in Epic Games, the group behind the popular game Fortnite. Iger said the two companies will join forces to build Disney Universe over the next few years. Iger said the move marks the company’s biggest shift yet into gaming, a space where tech giants like Microsoft are growing rapidly through large acquisitions.
One way to manage Disney’s cost base without standalone cuts could be to extract synergies from deals with other companies, according to analysts in the U.S. media sector at Barclays.
Walt Disney-owned Star India’s consolidated net profit for fiscal 2023 was ₹1.272 billion, down 31% from the previous fiscal, the company said in a filing with the Registrar of Companies. Novi Digital Entertainment, the subsidiary that owns Disney+Hotstar, more than doubled its net loss to Rs 748 crore, while revenue rose 35 per cent to Rs 4,341 crore. Novi is in the process of merging with its parent company, Star, in which it holds a 78.07% stake.
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