The deal will be effected by way of a preferential allotment of 9.35 million shares to Walt Disney at Rs860.79 ($21.71) apiece. The price represents a 5% premium to the allotment price based on the SEBI preferential allotment pricing formula.
Ronnie Screwvala, the founder and group CEO of UTV, will simultaneously consolidate his ownership of UTV by issuing 4.5 million warrants to himself at the same price as Walt Disney, thereby raising another Rs3.9 billion for UTV. UTV is being advised by DSP Merrill Lynch.
The deal sees Walt Disney increase its stake in UTV Software from 13.7% to 32.1% on a fully diluted basis. And as a result of the increase, Walt Disney has triggered a mandatory open offer to minority shareholders of UTV to acquire up to a further 20% of the shares at the same price. Though Disney has agreed with UTV to limit its stake to 32% for a period of four years, which means it will put any shares tendered by shareholders back to the UTV owners. Walt Disney is being advised by Goldman Sachs.
The UTV founders and Walt Disney will each have the right to appoint three directors on the 12-member UTV board. Ronnie Screwvala will be chairman and managing director of UTV for at least two successive terms of five years each.
UTV is also promoting a new subsidiary, UTV Global Broadcasting, in which it will invest around $60 million for a 75% stake. Walt Disney will invest $30 million for a 15% stake, and the remaining 10% will be owned by Screwvala personally. UTV Global Broadcasting houses two businesses: Genx Entertainment, which has launched two youth entertainment channels; and UTV Television Entertainment, which has world and Hindi movie channels.
Walt Disney will also acquire 720,000 warrants in UTV Global Broadcasting to increase its stake to a maximum of 37.5%. The company will have the right to nominate one director to the board of UTV Global Broadcasting.
Walt Disney has been operating in Indian since mid-2004. In July 2006 it acquired a 14% stake in UTV for Rs650 million. At the same time it bought from UTV 100% ownership of Hungama TV, a childrenÆs television channel broadcast in Hindi, for Rs1.4 billion. Outside of the US, India is the largest market Walt Disney has invested in for local production and content and it broadcasts in three local languages in the country, reaching 122 million homes.
In June 2007 Walt Disney entered a collaboration with a leading Indian film direction and production house, Yash Raj Studios, to make animated movies for Indian audiences. The first such movie is due to be launched this summer.
The investment and the open offer by Walt Disney are subject to shareholder and regulatory approvals.
UTV closed trading at Rs828 on Monday, down about 4% from the price at which it opened. The Sensex lost 67 points to close at 18,048.
