RIL to acquire Network18 in Rs 4,000 crore deal

Tags: News

Fareed Zakaria likely to replace founder Raghav Behl in India’s biggest media buyout

Mukesh Ambani-owned Reliance Industries on Thursday announced a Rs 4,000 crore takeover of media conglomerate Network18 group, ahead of the launch of its ambitious 4G-telecom services branded Reliance Jio across the country. In a statement issued today, RIL said it was set to take over the controlling stake in media company Independent Media Trust (IMT) that owns business and news channels, magazines, and other media properties.

Network18 owns popular TV channels CNBC TV18 and CNN-IBN, among a host of other digital channels.

Network18 founder and chairman Raghav Behl is widely rumoured to step down by June 30 and make way for internationally well-known journalist Fareed Zakaria by June 30. Zakaria, hosts popular CNN foreign affairs show and is an editor-at-large for Time magazine. News of Behl’s departure and Zakaria’s induction could not be independently confirmed. A RIL spokesman said the company would not comment beyond clarifying its official press statement. Network18’s CEO B Sai Kumar, COO Ajay Chacko and CFO RDS Bawa have already resigned from the company.

The RIL statement said, “The board of Reliance Industries Ltd (RIL) today approved funding of up to Rs 4,000 crore to Independent Media Trust (IMT), of which RIL is the sole beneficiary, for acquisition of control in Network 18 Media & Investments Ltd (NW18) including its subsidiary TV18 Broadcast Ltd (TV18). The open offers will be made consequent to the acquisition.

“This would result in acquiring control over NW18 and TV18 resulting in ownership of about 78 per cent in NW18 and 9 per cent in TV18 and to acquire shares tendered in the open offers.”

RIL watcher SP Tulsian said, “We can expect the open offer on Friday at the current market price, and it is going to be very positive for both the groups, but more so for Network18 and TV18, where the swing would be higher.”

The RIL spokesman sa­id the announcement for open offer would be made as soon as the Sebi gives its nod. “It can happen in a day or two,” he said.

Promoter holding in TV18 Broadcast Ltd is 57.08 per cent at present, and 72.98 per cent in Network18 Media and Investment Ltd. These, in turn, are held by various companies, which include the employee’s welfare trust. The pricing of the RIL offer would be decided as per Sebi rules, but is unlikely to be very high over the current market price, analysts said.

Following acquisition of 78 per cent in Network18, RIL would have to reduce its holding in the entity by 3 per cent in order to comply with the Sebi norm of 25 per cent minimum public holding.

Although RIL released its statement late in the evening, NW18’s stock price climbed 8 per cent earlier in the day's trading, to close at Rs 45.35. The stock jumped 6.46 per cent and 3.82 per cent, respectively, on Wednesday and Tuesday.

RIL said the acquisition would differentiate Reliance’s 4G business (Jio) by providing a unique amalgamation at the intersection of telecom, web and digital commerce. Jio has lately been on a hiring spree. In April, the firm said, its national employee count had grown to over 3,000. “The key leadership positions to execute the (4G) project are in place,” the company said.

RIL is building a futuristic broadband infrastructure to handle the huge demand for data and voice using “long term evolution” or LTE — a technology standard for 4G broadband.

Jio acquired pan-India airwaves in the 2,300 MHz band four years ago, and now look set to roll out services by September, ahead of the May 2015 deadline.

In February, it bought more airwaves in the 1,800 MHz band in 14 regions in a government auction. So, it owns spectrum in the 2,300 MHz and 1,800 MHz bands and plans to offer both broadband and voice services.

The RIL spokesman said the firm has been seriously moving towards securing infrastructure for its telecom business and the acquisition of Network 18 and its subsidiary should be seen as a step towards getting top level content for 4G business.

Earlier in 2012, the Reliance-promoted IMT had provided funding to the promoters of NW18 in the form of optionally convertible debentures to fund acquisition of RIL's stake in assets of Hyderabad-based ETV network and use it for acquisition of further shares by promoters through a rights issue made only to the promoters. At the end of FY12, NW18 had total loans of about Rs 1,700 crore on its consolidated books, as per Capitaline database.

Tulsian said, the ground for acquisition was prepared two years ago when the two Network18 firms announced a rights issue of around Rs 5,500 crore, which was funded by Reliance. The proceeds were used to retire debt of the two firms and the rest was used to acquire Ennadu TV channels of Ushodaya Enterprises run by Ramoji Rao.

“RIL has acquired all the channels after bringing them under one network. It provides them a ready mix of entertainment, news, online and other broadcast options for their 4G network, which they are expected to launch by or before Dhirubhai's birthday in December this year. RIL is already late by two years in launching the network and this is a very positive development in association of a brand name for both the firms,” Tulsian said.

As per the Network 18’s shareholding pattern, as on March 31, IMT already held 1.85 per cent stake in the company, according to the Capitaline database. IMT was listed as a public shareholder in the shareholding disclosure made by the company to stock exchanges. The collective promoter stake in NW18 as of March 31 was 72.96 per cent, which included 12.18 per cent stake held each by RB Media Holdings, RB Mediasoft, Adventure Marketing, Colorful Media and Watermark Infratech. Another significant promoter stake of 10.37 per cent was held in the name of RRB Mediasoft.

Assuming IMT will now take over the entire 72.96 per cent, its collective stake would go up to 74.81 per cent. Another trust company called Network 18 Media Trust, which was listed as a public shareholder, held 1.11 per cent stake in NW18 on March 31. If this too were to be included in IMT's acquisition, it would take the total holding to 75.92 per cent. FC could, however, not determine how RIL would raise its stake to 78 per cent, as stated in the RIL release.

NW18 is the owner of a suite of digital internet properties, e-commerce businesses and differentiated broadcast content.

Further, in terms of SEBI (Substantial Acquisition and Takeover Regulations), 2011, IMT would make simultaneous open offers to public shareholders for acquisition of equity shares of NW18, TV18 and Infomedia Press. RIL would be a person acting in concert to these open offers.

(With inputs from Rajesh Gajra, FC Research Bureau and Vikas Srivastav in Mumbai)


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