In a significant development, Reliance Industries Ltd (RIL) and Walt Disney have formally agreed, through a non-binding term sheet signed in London, to forge ahead with their joint venture to establish the largest media and entertainment conglomerate in India. Led by Mukesh Ambani’s group, the merger is structured as a 51:49 stock-and-cash deal, aiming for completion by February after necessary commercial and regulatory approvals. Kevin Mayer, a former Disney executive, and Manoj Modi, a close aide to Ambani, played key roles in the negotiations during the signing of the term sheet, which followed last week’s confirmatory due diligence.
Following the signing, a valuation exercise by independent assessors will commence, involving legal and tax advisors. The proposed plan outlines the creation of a subsidiary for RIL’s Viacom18, absorbing Star India through a stock swap. RIL intends to hold a controlling 51% stake, while Disney will own the remaining 49%. Both entities are treated as similar-sized businesses, and RIL is expected to pay cash for the controlling stake, with Jio Cinema included in the deal.
Negotiations also encompass a strategic business plan, aiming for an immediate capital injection of $1-1.5 billion. The board composition is anticipated to feature equal representation from Reliance and Disney, with a 45-60 day exclusivity period likely. Amidst these developments, the fate of the $10 billion merger between Zee Entertainment Enterprises and Sony Group Corp.’s local unit remains uncertain.
Investor sentiment towards Disney’s India business has been affected, notably losing online rights for streaming the IPL tournament to JioCinema. This joint venture between Reliance Industries and Viacom18 secured the rights for a record $6.2 billion, showcasing a shift where digital bids trumped traditional linear TV rights for the first time.
The estimated value of the Disney Star India business ranges between $5.5 billion to $6.5 billion. Viacom18, a significant player in the joint venture, experienced a 98% slump in net profit to Rs 11 crore in FY23, while Reliance’s entertainment business reported a 97% growth in revenue in H1 FY24. As of September 30, JioCinema stands as the top broadcaster-OTT app in the country.
Walt Disney’s Star India reported a 31% drop in consolidated net profit for FY23, and its subsidiary Novi Digital Entertainment, owner of Disney+ Hotstar, saw net losses more than double to Rs 748 crore, despite a 35% rise in revenue 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.
