Mumbai: With a week to go before the exclusivity period deadline for bilateral negotiations comes to an end on February 17, Walt Disney Co and Reliance Industries (RIL) are in the last leg of negotiations to finalise their mega stock-and-cash merger to create India’s largest media and entertainment business, said people in the know.

Under the terms of the talks, Viacom18 looks set to be the single largest shareholder, with 42-45% in the combined entity, they said.

Parent RIL is expected to invest up to $1.5 billion cash in the new entity and pick up a stake directly as well. As a group, Mukesh Ambani-led RIL will own 60%, with Walt Disney owning the remaining 40%.

Reliance executives are also working on their three-year capital allocation programme for all businesses to be presented shortly to the board. The media business will be a key part of growth plans, said the people cited above.

The proposal, as of now, is to create a step-down subsidiary of Viacom18 Media, which will absorb Star India via a stock swap, they said. Both businesses are being treated as similar-sized ones, valued at $4-5 billion each, so RIL will be paying cash for the controlling stake.

Eager to ConsolidateJio Cinema, a part of Viacom18, will be included in the deal.Disney’s valuation of the India business has fallen sharply from what it was pegged at when the Murdoch family crown jewel was acquired in 2019. This is largely on account of the mounting losses of Disney’s sports franchise in India, analysts said.

Viacom18’s entertainment network in the country 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 chief Uday Shankar. As a shareholder in Viacom18, Bodhi Tree will be an indirect shareholder in the new entity, contrary to reports, said the company executives involved.

ET was the first to report on December 25 that both sides had inked a non-binding agreement. Earlier, on December 12, it was also the first to report on the granular details of the joint venture that both sides had been working on.

A Disney India spokesperson declined to comment. Emails sent to Reliance remained unanswered as of press time.

“The Big 4 firms, who are doing the diligence from both sides, along with the multiple law firms engaged and company executives, are working against time to give the finishing touches (to the deal),” said a company executive. “They can extend the deadline mutually if they wish to, but both sides have the support of their top leadership to iron out all differences, if any, and wrap things up by the fiscal-end. The Indian media landscape is in a flux, so they want to join forces at the earliest and consolidate.”

The new company will be board-managed, with RIL to have a majority. Disney may settle for three on a board of eight or nine members, which will include independent directors.


Turning a Corner

At its recent first-quarter earnings call, Disney revealed that the operating loss from the sports business of its India unit had shot up 144% to $315 million for the quarter ended December 2023 on account of the ICC Men’s Cricket World Cup 2023 in India. The operating loss stood at $129 million in the corresponding quarter of the previous fiscal year, which included the ICC Men’s T20 World Cup 2022, a smaller event compared with the 50-over World Cup, ET reported February 9. Walt Disney follows an October-September annual financial calendar.

However, Disney+Hotstar, the video-streaming service owned by the Burbank, California-based company, saw its first-ever increase in paid subscribers since the loss of the digital rights to the Indian Premier League (IPL) last year. In the first quarter, paid users went up by 2% to 38.3 million, from 37.6 million at the end of the September quarter, but core Disney+ subscribers dropped by 1% to 46.1 million. The Disney+Hotstar service has seen a steady decline in its subscriber base in recent months, ever since it lost the IPL digital rights last year to Viacom18.

Disney chief executive Bob Iger has said the latest results proved that the media giant had “turned the corner and entered into a new era.”

Iger has been facing proxy battles with Nelson Peltz’s Trian Partners and Blackwells Capital, which are seeking board seats and other changes aimed at boosting share price. The stock rose 11.5% on February 8, its biggest one-day gain since November 2020, to a one-year high of $110.54, taking its advance in 2024 to about 22%. It was after better-than-expected quarterly numbers and the unveiling of several shareholder-soothing initiatives, 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. Both companies will join forces to build a Disney Universe over the next few years, a move Iger said marks the company’s biggest shift into gaming, a fast-growing space where tech giants like Microsoft are making mega strides via big-bang buyouts.

One way to manage Disney’s cost base without standalone cuts could be to extract synergies out of transactions with other companies, according to US media sector analysts at Barclays.

Walt Disney-owned Star India’s consolidated net profit for FY23 dropped 31% to Rs 1,272 crore from the previous fiscal year, according to its filing with the Registrar of Companies. Novi Digital Entertainment, the subsidiary that owns Disney+Hotstar, has seen its net loss more than double to Rs 748 crore, while revenue rose 35% to Rs 4,341 crore. Novi is in the process of merging with its parent company, Star, which holds a 78.07% stake in it.

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