Reliance, Bodhi Tree Said to Take 60 Percent Stake in Disney India Merger

Billionaire Mukesh Ambani's Reliance is close to merging its India media business with Walt Disney with a 51 percent-54 percent stake, a deal that values the US giant's Indian operations at just $3.5 billion (roughly Rs. 29,043 crore), said three sources with direct knowledge.

The valuation of Disney's India unit is sharply lower than the $15-$16 billion (roughly Rs. 1,24,475 crore - Rs. 1,32,774 crore) estimated when Disney acquired it in 2019. Disney's TV and streaming business in India has struggled over the years, with its digital platform facing a user exodus in stiff competition over cricket streaming with Ambani's platform.

The deal will strengthen Reliance's hold over India's $28 billion (roughly Rs. 2,32,351 crore) media and entertainment market, especially after a separate $10 billion (roughly Rs. 82,982 crore) merger deal between Japan's Sony and India's Zee Entertainment collapsed last week.

The three sources said Bodhi Tree, a joint venture between James Murdoch and former top Disney executive, Uday Shankar, is also set to take a stake of around 9 percent in the new merged entity. Disney will hold around 40 percent.

Reliance, Disney and Bodhi Tree did not immediately respond to requests for comment.

Reliance and Disney, which each have a streaming service as well as 120 television channels between them, have been in talks for months to create an entertainment superpower in the world's most populous nation.

Under the deal being discussed, Viacom18, the broadcast division of Ambani's Reliance Industries, will merge with Disney's India businesses. Viacom18's shareholders include Paramount Global as well as Bodhi Tree, which invested $500 million (roughly Rs. 4,149 crore) in the Indian company last April. Shankar also serves on Viacom18's board.

Two of the sources said the final percentage stake numbers could change. The sources declined to be identified because the talks are confidential.

A deal could be closed by mid-February, the sources said. One of the executives said Viacom18 was also likely to infuse some cash in the merged entity.

The third source said the deal talks were in advanced stages and some tax related matters were still being ironed out, though broad contours were almost finalised.

Antitrust, cricket rights

A Disney-Reliance merger could face many antitrust challenges due to the market power they could wield, especially as Sony and Zee were close to a separate merged entity in India.

Those regulatory hurdles may now ease.

"With the collapse of the Zee–Sony merger, the market will now be less concentrated, making it easier for Disney-Reliance," said Karan Singh Chandhiok, head of competition law at Indian law firm Chandhiok & Mahajan.

In India, despite its large population with growing incomes, the Burbank-headquartered entertainment giant has struggled to make money. Its streaming service makes less than a tenth of its Average Revenue Per User (ARPU) there compared to the United States and other international markets.

The US firm's streaming service lost nearly 34 percent of its subscribers between October 2022 and August 2023, as Ambani started offering free cricket on his new streaming platform after out-bidding Disney for the Indian Premier League (IPL) cricket tournament rights.

Several top Disney India executives have joined Viacom18 in recent months.

Disney misjudged Indians' willingness to pay, Disney sources have said, and the company recently changed tack by offering free cricket on smartphones, hoping the strategy will boost advertising revenue and offset the impact of a subscriber exodus, Reuters reported.

In November, Disney CEO Bob Iger said Disney's TV channels were doing well in India, but other parts of the business were struggling and it was seeking to "improve the bottom line."

© Thomson Reuters 2024