Reliance–Disney deal: A small step for Reliance, however large leap for media business?

The much-awaited merger of Reliance’s media belongings and Disney India enterprise is lastly taking place. Yesterday Reliance Industries (RIL), Viacom 18 (a subsidiary of Reliance Industries) and the century-old US media behemoth Walt Disney introduced the signing of a binding definitive settlement to merge the media belongings of Viacom 18 and Disney’s Star India. The worth of the merged entity has been pegged at $8.5 billion. Primarily based on RIL’s direct and oblique possession in Viacom 18, its efficient stake within the merged media entity is estimated to be 49-50 per cent.

Primarily based on RIL’s present share value, this represents simply ₹40-50 per share (or 1.5 per cent of worth). Additional, this worth is, to a big extent, already mirrored in its share value, given RIL’s current possession in Viacom 18. Bottomline: this transaction is insignificant for RIL.

Why the excitement?

The merger creates India’s main media conglomerate. The mixed portfolio of 120-plus channels span a number of genres (pan India)with viewership of over 750 million (broadcast and streaming). The mixed would possibly will give the merged entity leverage with advertisers throughout platforms (TV and digital/streaming) in addition to in content material negotiations with third events. With an enormous library of content material and unique licence to distribute Disney movies and productions inside India, and entry to the 30,000 content material belongings of Disney constructed over a century, the streaming providers can develop considerably over the long run.

That is stated to favour RIL’s telecom enterprise, provided that the streaming providers of the merged media entity can be bundled with it. However, the affect is probably not very vital as such bundling could be supplied with out proudly owning media belongings as properly.

Therefore whereas the deal is probably not a sport changer for RIL, given its dimension and scale, it’s a big occasion for the Indian media business and the ecosystem round it. A profitable completion of the deal will chart a brand new path within the evolution of the Indian media business.

Affect on listed subsidiaries

RIL’s listed media subsidiaries, Network18 Media and Investments and TV18 Broadcast, hit decrease circuit right this moment. TV18 is within the technique of being merged into Community 18, after which Community 18 will maintain 13-14 per cent (on a totally diluted foundation) in Viacom 18 (whose stake within the merged RIL-Disney media enterprise can be 46.82 per cent).

Thus the revamped Community 18 could have round 6 per cent stake within the new media conglomerate. With out adjusting for holding low cost, it will characterize round  25 per cent of market cap. Pls observe these are approximate estimates based mostly on present market cap of Community 18 and TV18, share-swap ratio and the elimination of Community 18’s present stake of over 50 per cent in TV18.

The detrimental response within the inventory is maybe as a result of small oblique possession within the merged entity, which suggests the upside from the RIL-Disney deal is probably not vital for Community 18 after adjusting for holding firm low cost for its stake in Viacom18.