RIL, Disney announce a big, fat Indian wedding

Walt Disney's local unit Star India will merge with Reliance Industries (RIL) subsidiary Viacom18 to create the country's biggest media and entertainment business valued at about $8.5 billion. RIL will assume control with a combined stake of 63% in the merged entity. The joint venture will also dominate sports with all the key cricket media rights in its possession. It will have over 750 million viewers across the country and will also cater to the Indian diaspora across the world, the companies said in a statement issued on Wednesday. The merger will create a media giant with a combined FY23 topline of ₹25,000 crore.

Mukesh Ambani-led RIL and Bob Iger-led Walt Disney have signed binding, definitive agreements, capping over four months of hectic negotiations. ET was the first to report that Reliance and Disney signed a non-binding term sheet on December 25. As reported by ET on February 28, Nita Ambani will serve as chairperson of the merged entity, while former Star India boss Uday Shankar will provide "strategic guidance" as vice chairperson.

'Landmark agreement'

"This is a landmark agreement that heralds a new era in the Indian entertainment industry," RIL chairman Mukesh Ambani was cited as saying in the statement. "This strategic joint venture... will help us pool our extensive resources, creative prowess, and market insights to deliver unparalleled content at affordable prices to audiences across the nation."

Iger said the merger will create long-term value.

"Reliance has a deep understanding of the Indian market and consumer, and together we will create one of the country's leading media companies, allowing us to better serve consumers with a broad portfolio of digital services and entertainment and sports content," he said in the statement.

Viacom18's media business will be merged into Star India through a court-approved scheme of arrangement as part of the transaction. Additionally, RIL will inject ₹11,500 crore ($1.4 billion) cash into the JV for its growth strategy. With this fund infusion, RIL's total investment in the media business amounts to ₹22,000 crore in the past year. In April 2023, it had invested over ₹10,839 crore as part of a ₹15,145 crore fund injection in Viacom18 that saw Bodhi Tree Systems invest ₹4,306 crore. Bodhi Tree is promoted jointly by James Murdoch and Shankar.

On a post-money basis, the Star-Viacom18 venture will be valued at ₹70,352 crore ($8.5 billion). RIL, Viacom18, and Disney will own 16.34%, 46.82%, and 36.84% of the venture, respectively. Currently, the RIL group including TV18 holds 71.02% in Viacom18 followed by Bodhi Tree at 15.97% and Paramount at 13.01%.

Shankar said the venture "is poised to shape the future of entertainment in India". He had led Star under both Fox and Disney before calling it quits in December 2020.

Based on the shareholding in the joint venture, Viacom18's stake is valued at approximately $4 billion, while that of Star is slightly over $3 billion, a far cry from the $15 billion that it once commanded. Disney had acquired Star as part of a $71 billion Fox entertainment asset acquisition in 2019, during Iger's previous tenure at Disney.

The venture will be granted exclusive rights to distribute Disney films and productions in India, with a licence to more than 30,000 Disney content assets, providing a full suite of entertainment options for the Indian consumer, according to the statement.

The transaction is expected to be completed in the last quarter of 2024 or the first quarter of 2025, subject to regulatory, shareholder and customary approvals.

The deal will see the exit of Paramount Global from Viacom18. Last year, Paramount's stake was diluted to 13% from 49% after a fund infusion by Reliance and Bodhi Tree Systems.

The merged entity will have over 100 TV channels such as Colors, StarPlus, StarGOLD, Star Sports and Sports18, spread across entertainment and sports, besides two streaming platforms, Disney+ Hotstar and JioCinema.

It will have all the key sports rights such as Indian Premier League (IPL), International Cricket Council (ICC) and Board of Control for Cricket in India (BCCI) matches. It will also have the rights for the Indian Super League and the Pro Kabaddi League. Disney may contribute additional media assets to the venture, pending regulatory and third-party approvals.