Scatmag.com

July 2014

RELIANCE TAKES OVER NETWORK-18


Reliance Industries Has Taken Over Network18 & TV18


BACKGROUND

On 2nd Jan 2012, (see SCaT Feb 2012) Mukesh Ambani declared that Reliance Industries Ltd (RIL) was taking a significant stake in Raghav Bahl's TV18 and the Network18 group of companies. Independent Media Trust was set up to finance the acquisition. Bahl retained 51% stake and management control but a clause was built in that allowed RIL the option to convert the Zero Coupon Optionally Convertible Debentures (ZOCDs) into equity shares of Network18, anytime within 10 years. This effectively gave RIL full takeover & direct control.



That was exercised on 30th May 2014. RIL said its ".. board had approved funding of Rs. 4,000 crore (Rs. 40 billion) to Independent Media Trust (IMT), of which RIL is the sole beneficiary," for taking over Network18.


" ... the promoters of Network18 & TV18 will pump in Rs. 4,000 Crores in both the companies. This will amount to their stakes going up to 90% in Network18 and 86% in TV18, raising the possibility that the promoters may even delist these companies." SCaT Feb 2012.

With the move, RIL has taken control of a media and entertainment empire that includes CNBC TV18, CNN-IBN, Colors & HomeShop18.

Mukesh Ambani now directly controls one of the largest Indian media conglomerates, which spans general news (CNN IBN, IBN7), business news (CNBC TV18 and CNBC Awaaz), and regional news (ETV news network and IBN Lokmat), apart from a 50% stake in entertainment channels like Colors, MTV, Comedy Central and film studio Viacom18 Motion Pictures. Also included are e-commerce and internet portals, for good measure.

There was an exodus of key personnel under Bahl. Network18 group CEO B Saikumar, COO Ajay Chacko and CFO RDS Bawa, all quit that day. The IBN-CNN News Channel Editor Rajdeep Sardesai and his wife and deputy editor at CNN- IBN Sagarika Ghose, went on leave immediately, and later declared that they had resigned.



GROUP COMPANIES

Over the past 20 years (since 1993) Bahl has relentlessly expanded his media empire in every direction possible. There are a plethora of companies. These are:

NETWORK18

Network18 Media & Investments Limited is an Indian mass media company with interests in television, print, internet, film, mobile content and allied businesses.

Network 18 FinCap is the holding company for several media entities in India such as TV18, HomeShop18, CNN-IBN, First Post (India), IBN 18 Broadcast Ltd, Web 18, Studio 18, Shop 18, Infomedia 18 & Viacom 18 which is a 50:50 JV with Viacom.

TV18

TV18 is a 50/50 joint venture in India between NBCUniversal and the Network 18 Group based in Mumbai.

TV18 owns and operates various channels of the NBCUniversal group for the Indian viewers, viz:

♦ CNBC-TV18

♦ CNBC-TV18 Prime HD,

♦ CNN-IBN, IBN7 & IBN-Lokmat

♦ History TV18

♦ CNBC Awaaz

VIACOM18

TV18 also operates a joint venture with Viacom, called Viacom18, which houses a portfolio of popular entertainment channels - Colors, Colors HD, MTV, Comedy Central, Vh1, Nick, Sonic, Nick Jr./Teen Nick and Viacom18 Motion Pictures, the group's filmed entertainment business.

A+E NETWORKS | TV18

TV18 has also forayed into the Indian factual entertainment space through A+E Networks | TV18 (a joint venture between A+E Networks and TV18 Broadcast) and operates HistoryTV18.

INDIACAST DISTRIBUTION

In 2012, TV18 and Viacom18 formed a strategic joint venture called IndiaCast, a multiplatform 'content asset monetization' entity that provides domestic and international channel distribution, placement services and content syndication for the bouquet of channels from TV18, Viacom18 and other broadcasters.

Indiacast is jointly owned by UTV (26%) + Network18 (37%) + Viacom18 (37%).

Network18 owns 50% of Viacom18 & Reliance has bought out UTV's 26% stake. Hence Reliance Industries Ltd which now owns Network18 effectively owns and controls 81.5% of Indiacast.

ONLINE ASSETS

Through 'Network18 Media & Investments Ltd.' the group operates its digital, publishing and e-commerce assets including moneycontrol.com, ibnlive.com, in.com and firstpost.com.

E-COMMERCE

'Network18' also operates e-commerce properties like HomeShop18 and bookmyshow.com

PRINT PUBLICATION

The group publishes Forbes India, the nation's first local edition of a foreign news magazine title, in collaboration with Forbes Media.

In addition, through 'Network18', the group operates Network18 Publishing, a player in the special interest publishing space.

OTHER PROPERTIES

Network18 has investments in Yatra, Stargaze and other Capital18 portfolio companies.


THE PURCHASE

RIL has made open offers for the shares of Network18, TV18 and Infomedia Press Ltd.

As per the open offer document under the SEBI substantial acquisition of shares and takeovers (SAST) regulation, IMT and other persons acting in concert, will spend Rs. 2,295.19 crore out of the Rs. 4,000 crore (Rs. 40 billion) in the first round of the open offer.

Network18 is largely (71.25% voting right) controlled by IMT vide its 2012 purchase. IMT will acquire the remaining 21.96% for Rs. 943.70 crore which translates to Rs. 41.04 per share.

IMT will be acquiring 26% additional stake in TV18 for Rs. 1,347.57 crore to lift its TV18 holding to over 81%.

Thereafter, as per law, RIL / IMT must offer to buy out the remaining shareholding with the public, and TV18 and Network18 will be delisted from the stock exchanges.

IMT will also spend Rs. 3.92 crore (@ Rs. 3 per share) to raise its Infomedia stake to 73.60%.


707 CR FOR BAHL

Raghav Bahl and his wife Ritu Kapur will take home Rs. 706.96 crore for their stake in the Network18 and TV18 group of companies. It is a well-deserved amount for the diversified media & entertainment conglomerate built from scratch since 1993.

IMT will spend Rs. 705.96 crore towards acquisition of Network18's several holding companies, which the Bahls own. Additionally, IMT will acquire the entire holding of RB Holdings Pvt Ltd (RBHPL) from Bahl and Kapur for a total consideration of Rs. 1.00 Crore. As a result, Bahl and Kapur will get an upfront amount of Rs. 706.96 crore (Rs. 7.07 billion).


Reliance Now Controls INDIACAST With Majority (81.5%) Stake

MANAGEMENT CHANGES

A complete takeover of this magnitude will certainly see changes in the top management of TV18 and Network18 immediately, and probably a more gradual change in the management of smaller companies in the Group.

The management changes began even before the take-over was made public. Ofcourse Bahl had in place an excellent team. However the companies were clearly over-staffed & several hundred have been retrenched by Bahl's team, a few months ago.

RIL too has made a few major hires, in the media sector. In May, Zee Media CEO Alok Agrawal quit to join RIL. Also, Gautam Chikermane joined RIL as New Media Director while BV Rao was appointed News & Communication Director.


TV CONTENT FOR RELIANCE 4G

It is widely reported that the much delayed Reliance Jio 4G wireless internet and telephony service will be finally rolled out around Divali 2014. To add impetus to its 4G broadband service, Jio plans to also offer TV channels and other content wirelessly to its consumers. A bouquet of more than 100 channels is talked about, mostly Free-To-Air. The Network18 and TV18 channels, e-commerce sites and internet portals will be an excellent complement to the service. n