Reliance and Disney in advanced talks for mega-merger in Indian media: Report

Reliance Industries Ltd (RIL) and Walt Disney Co. are on the verge of solidifying a monumental collaboration within India's media and entertainment landscape. Sources close to the negotiations have revealed to ET that both entities are finalising a non-binding term sheet to propel forward their plans for a merger, potentially establishing the largest media and entertainment conglomerate in the country.

The proposed strategy revolves around the creation of a subsidiary under RIL's Viacom18, aimed at incorporating Star India via a stock swap. In this arrangement, Reliance seeks a controlling interest in the merged enterprise, aiming for a majority stake of at least 51%, leaving Disney with a residual 49%. The deal is expected to involve a significant cash component from RIL to secure this controlling interest, as reported by ET.

A substantial injection of immediate capital, anticipated to range between $1-1.5 billion, forms a pivotal part of the negotiation, shaping the final shareholding structure and establishing the entity's value based on a cash infusion from both parties.

The board composition of the merged entity is envisaged to ensure equal representation from both Reliance and Disney, likely appointing a minimum of two directors from each corporation. Additional representation from Viacom18's major shareholder, Bodhi Tree led by Uday Shankar, is anticipated, with considerations for independent directors.

Key figures involved in the talks from Walt Disney Co. include Justin Warbrooke and Kevin Mayer, alongside K Madhavan, Disney’s India head, and The Raine Group providing advisory support. Reliance's negotiations are spearheaded by Manoj Modi, Ambani’s key adviser, backed by the group's M&A team.

An accelerated timeline for announcing the merger as early as the end of January is expected post the signing of the term sheet, followed by confirmatory due diligence and a comprehensive valuation exercise by independent valuers.

As part of the prospective collaboration, Walt Disney Co. is poised to grant the joint venture company an exclusive five-year licence for subscription video-on-demand (SVOD) content, featuring Disney+ originals and its extensive library. Further terms include a five-year lock-in, barring engagement with competitors and offering access to distribution channels and Jio Platforms under agreed conditions.

Financial insights from Viacom18 and Star India's filings with the Registrar of Companies paint a contrasting picture. Viacom18 witnessed a significant drop in net profit for FY23, while Star India saw a decline in consolidated net profit but a rise in operating revenue, consolidating its position as the largest traditional media and entertainment entity in India.

Novi Digital Entertainment, the entity behind Disney+ Hotstar, experienced a surge in revenue but also a substantial increase in net loss, amidst ongoing consolidation efforts with its parent company, Star.

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