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TV18 to acquire ETV, Network18 and TV18 to become debt-free

CNN-IBN
Jan 03, 2012 at 04:28pm IST

New Delhi: In a significant move, Network 18 and TV 18 announced an expansion into regional news and entertainment on television through a Rs 2,100-crore acquisition of ETV channels. Both the companies also announced rights issues for themselves, each amounting to Rs 2,700 crore. The proceeds will be used to make both the companies debt-free, finance the ETV acquisition, and fund working capital requirements.

Importantly, Raghav Bahl will retain management and 51 per cent control over both Network18 and TV18. In addition, both companies will gain access to Infotel, which is RIL's new 4G Broadband Digital Platform.

The Board of Directors of TV18 Broadcast Limited (TV18) at its meeting on Tuesday approved the acquisition of 100 per cent interest in regional news channels in Hindi namely ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan and ETV Bihar and ETV Urdu channel (ETV News Channels), 50 per cent interest in ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya (ETV non Telugu General Entertainment Channels) and 24.50 per cent interest in ETV Telugu and ETV Telugu News (ETV Telugu Channels).

TV18 will have board and management control of ETV News Channels and ETV non Telugu GEC Channels. The Board has approved an outlay of up to Rs 2,100 crore for this acquisition. TV18 also has an option to buy the remaining 50 per cent interest in ETV non Telugu GEC Channels and an additional 24.50 per cent interest in ETV Telugu Channels.

At a board meeting on Tuesday, January 3, Network 18 Media & Investments Limited (Network18) approved a rights issue of equity shares to raise an amount up to Rs 2,700 crore at a price to be determined by the Board in compliance with regulatory requirements, but not exceeding Rs 60 per equity share.

At a board meeting on Tuesday, January 3, TV18 Broadcast Limited (TV18) also approved a rights issue of equity shares to raise an amount up to Rs 2,700 crore at a price to be determined by the Board in compliance with regulatory requirements, but not exceeding Rs 40 per equity share.

Network18, being the promoter and holder of majority equity in TV18, will subscribe to approximately Rs 1,400 crore in the rights issue of TV18. Therefore, once this subscription amount is netted out, the net aggregate rights issue of both Network18 and TV18 will result in a fundraising exercise of about Rs 4,000 crore. The contribution of the current promoter entities of Network18 in this net aggregate rights Issue of both Network18 and TV18 will be about Rs 1,700 crore.

TV18 will utilise the rights issue proceeds to repay its existing debt, fund the acquisition of the ETV Channels and fund working capital needs. Network18 will utilise the rights issue proceeds to repay its existing debt and subscribe to the rights issue of TV18.

The promoters of Network18 will be subscribing to their entitlement in full. The promoters also reserve the right to subscribe to any unsubscribed public portion of the rights issues. Raghav Bahl, the Promoter of Network18 and TV18, has informed that promoter companies have entered into an arrangement with Independent Media Trust, a trust set up for the benefit of Reliance Industries Limited, to secure the funding required for this purpose.

Further, Raghav Bahl, Founder and Promoter, shall continue to retain Management and 51 per cent Control over Network18 and 51 per cent control over TV18 through Network18.

Both the companies will be filing the draft letters of offer for their respective rights issues shortly.

Raghav Bahl, Founder, Editor & Managing Director of Network18, said on Tuesday, "This is a truly seminal moment in the 18-year-old history of Network18/TV18. By inducting such a significant amount of equity, our balance sheets will become among the strongest in the industry. Also, by acquiring this strategic control over several ETV Channels, TV18 will have a bouquet of leading television channels. Riding on the imminent digital wave, I am convinced that this acquisition is a significant move which will catapult TV18 into the forefront of India's broadcasting industry. The proposed preferred access arrangement with Infotel Broadband will ensure that our content and services will be available on India's premier technology distribution platform, with the widest catchment of high quality consumers across the country. Further, on a debt free basis, both Network18 and TV18 hope to strengthen their position in various media segments like news and entertainment broadcasting, consumer internet, digital & print publications, filmed entertainment, home-shopping, e-commerce and other emerging businesses."

ETV is one of the leading TV Networks in South India. It is also among the top five most popularly viewed networks in the country. ETV Channels were one of the first entrants in the regional markets and have a considerable viewership base. One of the key strengths of ETV Channels is their ability to attract and retain loyal viewers who are regular watchers of the quality content on these channels. TV18 is confident of taking these regional channels to even greater success with its strategic inputs, improved content/programming strategies and operational synergies.

Ernst & Young (P) Limited (E&Y) acted as advisors for financial and tax due diligence and valuation of the assets. The legal due diligence was carried out by Khaitan & Co.

On a combined basis, TV18 will be offering a unique mix of national and regional channels catering to diverse genres like Hindi and regional entertainment; general news in English, Hindi and regional languages; business news in Hindi, English and regional languages; music; kids; devotional and infotainment channels. Including the soon-to-be-launched services/variants, this combined bouquet of over 25 channels will be the most powerful and potentially profitable TV operation in the country, especially since India's television industry is on the verge of a digital revolution.

As a part of the deal for acquisition of ETV Channels, Network18 and TV18 have also entered into a Memorandum of Understanding with Infotel Broadband Services Limited (Infotel), a subsidiary of Reliance Industries Limited, under which the Companies and their associates will have the right to distribute the content of all the media and web properties of Network18 and programming and digital content of all the broadcasting channels (including the ETV Channels which are being acquired by the Company) through the 4th Generation Broadband Network of Infotel. Infotel shall have preferential access to this content on a first right basis as a most preferred customer.

Infotel Broadband Services Limited is setting up a pan-India world-class broadband wireless network using state of the art technology. Network18 and TV18 expect Infotel to become one of the leaders in content distribution through broadband technology. As per Images Year Book, more than 70 per cent of India's population is below 35 years of age, and 50 per cent of the population is below 25 years of age. This young educated population will be keen to access quality content through wireless devices, thereby ensuring rapid growth in subscribers, similar to the growth of tele-density in India during the last ten years.

The key advantage for millions of viewers will be the ability to enjoy an uninterrupted, high quality, 24-hour viewership, even while they are on the move. This tie-up with Infotel will enable Network18 and TV18 to build on their first-mover advantage for the distribution of their content through the latest broadband technology.

Network18 and TV18 firmly believe that Reliance's technical & execution expertise, ability to manage scale, consumer insights and unique understanding of India's commercial landscape will greatly benefit the Companies and create value for all the stakeholders of both the Groups.

Also on Tuesday, RIL announced that a part of the interest owned by it in the ETV Channels is being divested to TV18 Broadcast Limited (TV18). As a part of the deal, Infotel Broad Band Services Limited ("Infotel"), a subsidiary of RIL, has entered into a Memorandum of Understanding with TV18 and Network18 Media and Investments Limited (Network18) for preferential access to all their content for distribution through the 4G Broadband Network being set up by it.

RIL, through investments of about Rs 2,600 crore by its group companies, currently holds interest in various ETV Channels being operated and managed by Eenadu Group viz. 100 per cent economic interest in regional news channels, namely ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar and ETV Urdu channel ("News Channels"), 100 per cent economic interest in ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya ("Entertainment Channels") and 49 per cent economic interest in ETV Telugu and ETV Telugu News ("Telugu Channels").

A part of the above investments, comprising 100 per cent interest in News Channels, 50 per cent interest in Entertainment Channels and 24.50 per cent interest in Telugu Channels is being profitably divested to TV18 Broadcast Limited.

Independent Media Trust ("Trust"), a trust set up for the benefit of Reliance Industries Limited, has agreed to fund the Promoters of Network 18 and TV18 to enable them to subscribe to the proposed Rights Issue announced by both the companies today. The Promoter Companies of Network18 and TV18 and the Trust have entered into a Term Sheet under which the Trust would be subscribing to the Optionally Convertible Debentures to be issued by the Promoter Companies.

Reliance will leverage its deep understanding of the Indian markets - consumer insights, technological expertise, and the ability to build & manage scale - to make this a "win win" partnership. This will create value and be accretive to the shareholders of RIL.

Raghav Bahl and his team will continue to have full operational and management control of both the companies. Bahl and the current Promoter Entities of Network18 and TV18 will continue to retain control over Network 18 and TV18. RIL reposes full faith in the current leadership and management team of Network18 and TV18.

The investments in these media properties are being made by RIL through an independent Trust which will have eminent individuals as Trustees, thus preserving the management, operational and editorial independence of these media companies.

The investment by the Trust in the Promoter Companies of Network18 and TV18, and the arrangement between Network18/TV18 and Infotel for the acquisition and distribution of content on the Infotel platform, is one of many such partnership initiatives being undertaken by Infotel.

The combination of India's leading TV content provider, with a bouquet of nearly 25 channels, and Infotel, will be a significant step in bringing a high quality "live TV" experience to broadband customers across the country. Likewise, Network18's market-leading web portals and e-commerce operations will provide several value added services to Infotel's broadband subscribers. This unique alliance is expected to differentiate Infotel and create value for all stakeholders.

Disclaimer: IBNLive.com is owned by Network18. CNN-IBN is owned by TV18.

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