The Securities and Exchange Board of India (Sebi) has cleared the twin rights issues of TV18 Broadcast and Network18, paving the way for the execution of one of the largest media deals.
In its weekly disclosure of processing the status of offer documents, Sebi said it had cleared the rights issue documents of both companies on August 17. Both companies had filed the offer documents in March. A banker privy to the development said these clearances completed the regulatory formalities for the deal. “The issues have been cleared. We are expecting these by next month,” he said.
As a sign of initiating the multi-level merger process, the promoters have already begun transferring shares into new promoter entities. Regulatory filings show original promoters such as Raghav Bahl, Ritu Kapur, RB Holdings and RB Investments have begun transferring shares to six entities — RB Media Soft, RRB Mediasoft, RB Media Holdings, Adventure Marketing, Watermark Infratech and Colourful Media. After the transactions, Network18 Media’s promoter holding would be consolidated under these six entities. RRB Mediasoft would hold 12.67 million shares, or 8.65 per cent, while the other promoters would hold about 8.27 million shares, or about 5.65 per cent, each, according to regulatory filings.
| DEAL GETS UNDERWAY Sebi move paves way for the completion of RIL-TV18- Eenadu deal |
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Before the consolidation, the promoter group shares were scattered in about 20 different entities. The only other promoter group entity with significant holdings would be the Network18 Senior Professionals Trust, which holds 10.86 per cent. Subash Bahl, Ritu Kapur, Vandana Malik and the Network 18 Employees Welfare Trust would continue to hold a few thousand shares each.
| PROMOTER GROUP HOLDING OF NETWORK18MEDIA | |
| Original shareholders | % of equity shares |
| R B Holdings P Ltd | 25.14 |
| NW18 Group Senior Professionals Trust | 10.86 |
| Raghav Bahl | 8.78 |
| RB Investments | 2.55 |
| Others | 0.97 |
| Total | 48.3O |
| New shareholders | % of equity shares |
| NW18 Senior Professionals Trust | 10.86 |
| RRB Mediasoft | 8.65 |
| RB Mediasoft | 5.65 |
| Watermark Infratech | 5.65 |
| Colourful Media | 5.65 |
| Adventure Marketing | 5.65 |
| RB Media Holdings | 5.65 |
| Others | 0.54 |
| Total | 48.3O |
| Compiled by BS Research Bureau Source: Stock Exchange filings | |
When the rights issue commences, Independent Media Trust, of which Mukesh Ambani’s Reliance Industries is a beneficiary, would infuse fresh funds into these promoter entities to enable these to subscribe to the shares. The two rights issues, expected to raise about Rs 5,000 crore, would be vital to funding the acquisition of the key channels of Andhra-based Eenadu TV Network and repaying the group’s debt.
Through a three-way deal announced in January, Independent Media Trust would fund the promoters of Network18 and TV 18 to subscribe to the rights issues.
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Of the Rs 2,700 crore raised through the rights issue, Network18 would use Rs 1,384 crore to subscribe to the rights issue of TV18 Broadcast to keep its maintain a stake of more than 50 per cent in the company. Of the remaining funds, it would use Rs 1,182 crore to repay loans. TV18 would use Rs 1,925 crore to complete the ETV acquisition and Rs 421 crore to repay loans in its books, the companies stated in their offer documents.
TV18 would acquire a firm called Equator, which in turn owns a firm called Panorama, which controls ETV’s news channels business. Equator also holds 50 per cent stake in Prism, which owns ETV’s entertainment channels and 24.5 per cent in the third entity Eenadu, which owns the Telugu news channels. “TV18 proposes to undertake the ETV acquisition, which would be entirely funded from the proceeds of the rights issue of TV18. In connection with the ETV acquisition, we (Network18) and TV18 have entered into a share purchase agreement with Equator, Altitude and Kavindra,” Network18 stated in its offer document.
Altitude and Kavindra, which together own Equator, would sell their holdings to TV18 for an aggregate consideration of Rs 1,925 crore, the offer document stated. Explaining the structure of the three-way deal, the offer document stated Independent Media Trust would subscribe to the zero-coupon optionally convertible debentures issued by the promoter entities. The money raised would be used to subscribe to respective entitlements in the rights issues and any shortfall thereof. The investment agreements for these bond issues were signed on February 27.
However, the significant erosion in the price of both stocks since the day the deal was announced, remains a concern. While Network 18 Media shares have fallen 37 per cent to Rs 32 per share since January, TV18 shares saw a 42 per cent decline to close at Rs 20.6.