Walt Disney Co and Reliance Industries (RIL) are in the final round of talks to seal a mega stock-and-cash merger, which would establish India’s largest media and entertainment business, The Economic Times reported.
With the exclusivity period deadline for negotiations set to end on February 17, the two companies have intensified efforts to forge the details of the deal.
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Viacom18 is poised to emerge as the primary shareholder, potentially holding a 42-45 per cent stake in the merged entity, a source mentioned in the ET report added.
RIL, the parent company, is anticipated to inject up to $1.5 billion in cash into the new venture and secure a direct ownership stake.
Overall, the Mukesh Ambani-led conglomerate is expected to hold a 60 per cent share, with Walt Disney retaining the remaining 40 per cent.
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In addition to the ongoing discussions, RIL executives are formulating a comprehensive three-year capital allocation strategy encompassing all sectors of the business, with focus on the media division’s role in future growth initiatives.
Under the current proposal, plans involve establishing a subsidiary of Viacom18 Media to absorb Star India through a stock exchange agreement. Both entities are evaluated similarly, with estimated values ranging between $4-5 billion each.
Jio Cinema, a component of Viacom18, is also anticipated to be incorporated into the deal.
Analysts attribute a decline in Disney’s valuation of its Indian operations to mounting losses within its sports franchise, particularly in light of the ICC Men’s Cricket World Cup 2023 in India.
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Despite this setback, Disney+Hotstar, the company’s video-streaming platform, recently experienced a surge in paid subscribers following a period of decline post the loss of digital rights to the Indian Premier League (IPL).
Disney CEO Bob Iger expressed optimism regarding the company’s trajectory, citing recent earnings results as evidence of a promising shift.
However, Disney has been involved in proxy battles with investors seeking changes to boost shareholder value.
Amid these challenges, the company’s stock witnessed a notable 11.5 per cent surge on February 8, reaching a one-year-high, driven by better-than-expected financial performance and shareholder-friendly initiatives.
Looking ahead, Disney’s strategic investments, including a $1.5-billion partnership with Epic Games, signal its intent to expand into th evolving gaming sector.
As negotiations between Disney and RIL near their conclusion, stakeholders anticipate the formation of a board-managed company, with RIL holding a majority share.
