Reliance Signs Non-Binding Term Sheet With Disney For Merger Of India Business

SUMMARY

The stock-and-cash deal for the merger of the media and entertainment operations of RIL with Walt Disney Co’s India business will result in the former owning 51% stake in the merged entity

The acquisition is likely to take place with RIL setting up a new subsidiary which will absorb Disney’s Star India ops through a share swap deal, while JioCinema would also be part of the deal

With both JioCinema and Disney+Hotstar becoming a part of the merged entity, it would have one of the largest shares in the Indian OTT market

The talks for the merger of the media and entertainment operations of Reliance Industries Ltd (RIL) with Walt Disney Co’s India business moved a step closer with the companies signing a non-binding term sheet in London last week for it.

According to a report by ET, the stock-and-cash deal will result in RIL owning 51% stake in the combined entity. The merger is expected to be completed by February next year post regulatory approvals.

The report added that following the signing of the non-binding term sheet, a valuation exercise by independent valuers will begin and legal and tax advisors will be appointed to the board.

The acquisition is likely to take place with RIL setting up a new subsidiary which will absorb Disney’s Star India through a share swap deal. JioCinema, the OTT app of RIL, will also be included in the deal.

The merger will also include an immediate capital investment of approximately $1-1.5 Bn. The new entity’s board is anticipated to have equal representation from both the sides, with at least two directors from each. Bodhi Tree’s Uday Shankar, the second largest shareholder in Viacom 18 with over 15% stake, is likely to get a seat on the board of the new entity.

Walt Disney Co had acquired the entertainment assets of 21st Century Fox in 2019 for a whopping $7.1 Bn. Post the acquisition, Hotstar, a wholly owned subsidiary of Star India, was rebranded as Disney+Hotstar. At the time of acquisition Star India was one of the major cash cows for 21st Century Fox.

However, Disney has been in the hot waters ever since it lost the streaming rights for the Indian Premier League (IPL) in 2022 for the 2023-2027 period. The streaming rights were won by none other than Viacom18 for a record $6.2 Bn.

Following this, JioCinema streamed the IPL for free, which resulted in Disney+ Hotstar seeing subscribers leave in droves.

Besides this, Disney, earlier this year, announced that it would stop streaming HBO content. The development came on the heels of Disney not renewing the rights to stream Formula One in India.

While Disney+Hotstar recorded a peak viewership of 5.9 Cr as cricket returned to its platform in the form of ICC World Cup, the platform is still scrambling for new users.

Earlier this year, Disney Star also undertook a massive internal restructuring.

With both JioCinema and Disney+Hotstar becoming a part of the merged entity, it would have one of the largest shares in the Indian OTT market.

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