In a strategic move set to reshape India’s media and entertainment landscape, Reliance Industries Ltd. (RIL) and Walt Disney Co. are reportedly in the final stages of drafting a non-binding term sheet for the merger of their Indian operations.
This potential collaboration, if materialized, could lead to the formation of the country’s largest media and entertainment entity, with RIL securing a controlling stake in the partnership.
The envisioned plan involves the creation of a step-down subsidiary of RIL’s Viacom18, absorbing Star India through a stock swap, according to insiders familiar with the ongoing negotiations.
Reliance aims to hold a majority share, at least 51%, in the merged company, with Disney retaining the residual 49%. Both entities are regarded as similar in size, prompting RIL to consider a cash payment for the controlling stake.
Negotiations also include a proposed business plan that involves an immediate capital injection ranging between $1-1.5 billion. The final shareholding structure will be determined based on the respective cash contributions from both parties, with the board expected to have equal representation from Reliance and Disney, each appointing at least two directors.
Key figures involved in the talks include Justin Warbrooke, CFO of Disney’s direct-to-consumer business and international head of business operations, and Kevin Mayer, a former Disney executive. Manoj Modi, a key advisor to Mukesh Ambani, is leading negotiations for Reliance.
The joint venture’s board may also include representatives from Bodhi Tree and independent directors.
The timeline for the merger announcement could be as early as the end of January, following key meetings and the signing of the term sheet. Afterwards, confirmatory due diligence will be conducted, and the valuation process will officially commence with independent valuers.
While the merger is described as an equity-based arrangement, not an acquisition, with Reliance being the major shareholder, both parties are expected to retain rights.
Additionally, Disney is anticipated to grant a five-year exclusive subscription video-on-demand (SVOD) content license for Disney+ originals and its library content to the joint venture.
Walt Disney CEO Iger expressed the company’s desire to strengthen its position in India during an earnings call in November.
Analysts at Barclays suggest that merging Star India with Reliance Jio’s local media business could yield significant cost and revenue synergies, potentially transforming the business in the long term.
Viacom18, a significant stakeholder in the proposed merger, witnessed a decline in net profit for FY23, while revenue from operations rose.
Star India, on the other hand, reported a 31% drop in consolidated net profit. Novi Digital Entertainment, the Disney+ Hotstar subsidiary, is in the process of merging with its parent company, Star.
With negotiations entering their conclusive phases, attention is riveted on unfolding events that have the potential to reshape the dynamics of India’s media and entertainment sector.
