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Drama unfolds as Reliance Industries takes charge of Network18 and TV18

MUMBAI: For founder-promoter Raghav Bahl, it is all over. In an unprecedented swirl of events, Mukesh Ambani’s Reliance Industries Ltd (RIL) has taken charge of a media and entertainment empire that boasts of crown jewels like CNBC TV18, CNN-IBN and Colors.

Mukesh_AmbaniIn the process, there has been drama never witnessed before in Indian corporate history. The last couple of days has seen the exit of Network18 group CEO B Saikumar, COO Ajay Chacko and CFO RDS Bawa. More are to follow and the industry is expecting the announcement of Bahl’s exit any time now.

Though the writing was on the wall ever since Bahl inked a deal with Ambani in 2012, nobody expected the end would come so early and in such an overwhelming way. India’s richest billionaire will have his stamp all over.

In 2012, nobody noticed a clause that would have allowed RIL to step in any time with full direct control. Even if they had, they hadn’t swallowed it in. The industry had given it a few more years, with Ambani indirectly calling the shots.

One could have sniffed the change on Wednesday when Saikumar announced his resignation. Later in the evening, Chacko said he was quitting. Surprising as the day before, he had called TelevisionPost.com’s editor-in-chief to discuss about the company’s financial results (which was announced the same day).

Raghav-BahlNo matter how prepared we all were, the big shocker came the next day. 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.

IMT would use the funds to acquire control over Network18 and TV 18, resulting in ownership of about 78 per cent in Network18 and 9 per cent in TV18, and to acquire shares tendered in the open offer.

Why get surprised? If you are Mukesh Ambani, you do not delay. RIL was just exercising its option to convert the Zero Coupon Optionally Convertible Debentures (ZOCDs) into equity shares of the target company, in this case Network18, anytime within 10 years.

RIL makes open offers

RIL has made open offers consequent to the acquisition to the public shareholders for the shares of Network18, TV18 and Infomedia Press Ltd.

As per the open offer document under the Securities and Exchange Board of India (SEBI) substantial acquisition of shares and takeovers (SAST) regulation, IMT and other persons acting in concert (PAC) namely Sanchar Content Private Ltd (SCPL), along with with RIL and Reliance Industrial Investment and Holdings Ltd (RIIHL), will spend 57.4 per cent or Rs 2,295.19 crore (Rs 22.95 billion) out of the Rs 4,000 crore (Rs 40 billion) in the first round of the open offer.

TV18Network18 is largely controlled by IMT through indirect acquisition (conversion of warrants) of 74,61,88,987 equity shares (face value Rs 5) or 71.25 per cent voting right. IMT is looking to acquire the remaining 21.96 per cent stake, or 22,99,46,996 equity shares, in the company for an aggregate amount of Rs 943.70 crore (Rs 9.44 billion) which translates into Rs 41.04 per share. This is at a discount of 9.10 per cent to Thursday closing price of Rs 45.15 per share on the BSE.

Accordingly, IMT will be acquiring 26 per cent stake in TV18 to lift its holding to over 81 per cent (once reached the company will have to buy out entire stake as per SAST guidelines), whereas it aims to buy out the entire stake of Network18 in which it currently holds 71.25 per cent equity of the total paid-up capital.

As per the filing with the BSE, IMT will be spending Rs 1,347.57 crore (Rs 13.48 billion) or 33.69 per cent of total fund set aside for acquisition of TV18’s 26 per cent equity share.

Bahl (6,42,909 equity shares direct holding 0.037 per cent), Ritu Kapur (53,295 equity shares direct holding 0.003 per cent), and both Bahl and Ritu Kapur (6,77,33486 equity shares through holding company 3.94 per cent) would continue to retain direct shareholding in TV18 following the offer.

Network 18IMT also holds 2,39,13,061 equity shares of Infomedia, which is 47.60 per cent of total voting right and has triggered the open offer. IMT and PACs have offered to purchase 1,30,62,224 shares, or 26 per cent of the company’s stake, at an offer price of Rs 3 per share. When compared with the Thursday closing price of Rs 3.21 per share on the BSE, the open offer price is at a discount of 7 per cent.

The company will be spending Rs 3.92 crore (Rs 39.2 million) towards acquisition of the Infomedia stake. Following the acquisition, IMT would raise its stake to 73.60 per cent or 3,69,75,285 of Infomedia’s total paid-up equity capital.

Meanwhile, RIL has mentioned that this acquisition will differentiate RIL’s 4G business by providing amalgamation at the intersect of telecom, web and digital commerce via a suite of premiere digital properties, which includes in.com, ibnlive.com, moneycontrol.com, firstpost.com, cricketnext.in, homeshop18.com, bookmyshow.com and broadcast channels.

However, what the announcement also means is that Ambani will now directly control one of the biggest news networks in India, spanning across 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 per cent stake in entertainment channels like Colors, MTV, Comedy Central and film studio Viacom18 Motion Pictures.

It is also evident that he will restructure the top management and a mass exodus is expected, following in the footsteps of Saikumar, Chacko and Bawa. This could extend to the editorial team as well.

In a parallel move, RIL has made a few major hires. Earlier this month, Zee Media CEO Alok Agrawal quit to join RIL. Besides, Gautam Chikermane has joined RIL as New Media Director while BV Rao is appointed as the News and Communication Director.

As is widely known, RIL subsidiary Reliance Jio Infocomm plans to launch 4G services with a major thrust on value-added services (VAS) like live TV and video-on-demand. There is a lot of expectation that the launch will have deep impact in the telecom and television sectors.

But all eyes are now on what leadership changes take place in TV18’s editorial team.

Also read:

Reliance Industries to acquire Network18
Top level exits continue to rock Network18; CFO RDS Bawa quits

Network18 group COO Ajay Chacko also quits
B Saikumar steps down as Network18 group CEO