In order to advance with plans to merge their India-based media operations, Walt Disney and Reliance Industries Ltd (RIL) are finalising details of a non-binding term sheet, according to a report by The Economic Times (ET).
Disney had been mulling a sale of its stakes in its Indian TV network after the Indian unit lost its streaming rights to the Indian Premier League (IPL) to Viacom18 Media Pvt, a joint venture between Paramount Global and RIL last year. Bloomberg had reported in October that some of Reliance’s media units could be merged into Disney Star.
Sources told ET that plans for a step-down subsidiary of RIL’s Viacom18 are being floated to absorb Star India through a stock swap. Reliance is pitching for a controlling stake with at least 51 per cent in the merged company with Disney owning 49 per cent, they said. Reliance is likely to pay cash for the stake.
ET reported that the new board is likely to have at least two directors each from Reliance and Disney. Bodhi Tree, the second largest shareholder in Viacom18 after Reliance with a 15.97 per cent stake, is a contender for a seat on the board.
Bodhi Tree is led by Uday Shankar, who previously was the president of The Walt Disney Company Asia Pacific, and chairman of Star India and The Walt Disney Company India.
Both companies are also likely to inject cash as capital investment, which is expected to be in the range of $1-1.5 billion.
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ET reported that both sides are likely to announce the merger, possibly as early as January. The valuation exercise will officially start with independent firms after the term sheet is decided and due diligence is done. Disney India is likely to give the merged entity its library content and a five-year licence for exclusive subscription video-on-demand (SVOD) content for Disney+ originals.
A source was quoted as saying that Disney and Reliance will inject equity instead of one buying the other out for cash. Even the junior shareholder will have rights. It is a merger with unequal shareholding.
Believed to be instrumental behind the scenes are Justin Warbrooke, chief financial officer (CFO), direct-to-consumer business, and international head of business operations, and Kevin Mayer, a former Disney executive brought back in July by CEO Bob Iger as an adviser. After previous stints at Disney, Mayer had been running Candle, a media group co-founded with Blackstone's backing.
Mukesh Ambani’s key adviser, Manoj Modi, is handling the discussions for Reliance, along with the group's mergers and acquisitions team.