Update: Looks like Reuters (NSDQ: RTRSY) got it wrong: just spoke to a UTV spokesperson, who told me that Disney’s (NYSE: DIS) open offer to UTV Software shareholders is a part of the process of acquiring 32.1 percent stake. So Disney will not acquire a controlling, 52.1 percent stake.
Original Story: Disney will increase its shareholding in UTV Software to 32.1 percent for a sum of $200 million (around Rs. 805 crores),
and is eying a controlling stake in the company: Disney will make an open offer to UTV Software shareholders for 20 percent more stake in the company, at Rs. 860.79 per share for 7.75 million shares, as per an advertisement issued in the Business Standard. The open offer amounts to Rs. 667.11 crores , and once it is completed, Disney will hold 52.1 percent stake in UTV Software – a controlling stake. How has the stock market responded? UTV is down around 3 percent, at around 836.80. The market is down around a percent. The stock had closed at Rs. 862.5 on Friday, so Disney wasn’t offering much of a premium.
Apart from this, Disney will also invest approximately $30 million for a 15 percent stake in UTV Global Broadcasting Limited (UGBL), which has launched two channels recently, and has more planned. UTV Software will also invest $60 million in UGBL for a 75 percent stake, while the remaining shares (10 percent) will continue to be held by the Unilazer and the promoter group. Disney will have the right to nominate one director to the board of UGBL.
More in the extended text.
UTV Software has informed the BSE that 93,52,500 equity shares will be issued to Disney at a price of Rs 860.79 per share. The deal is subject to shareholder and regulatory approval – particularly from the Foreign Investment Promotion Board (FIPB). One should bear in mind that this deal is around non-news content; news media has an Foreign Direct Investment limit of 26 percent, so I don’t think UTV’s news operations are likely to be a part of this deal. They’re planning to launch a business channel. Update: UTV’s news operations are a part of UGBL, in which Disney has acquired 15 percent stake.
Another 45,32,000 warrants (convertible into equity shares) have been issued to UTV CEO Ronnie Screwvala promoted Unilazer Exports and Management Consultants Ltd (Unilazer) at the same price, for Rs 390 Crores. Unilazer, alongwith its promoters, currently holds 30.67 shares of UTV Software. Unilazer and Disney will appoint 3 directors each to the 12 member board of UTV software. Ronnie Screwvala will be Chairman and MD for two successive terms of 5 years each.
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