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Star India closes Maa TV deal for $346 mn
MUMBAI: Star India has closed the Maa TV deal for $346 million in cash, which is $29 million less than the $375 million it had earlier agreed to pay for acquiring the Telugu-language broadcaster. It is not clear if this is due to the foreign currency fluctuation.
Star acquired the entire broadcast business of Maa Television Network in December 2015 for approximately $346 million in cash, including payments towards non-compete agreements.
Based on a provisional valuation of Maa TV, the excess purchase price of approximately $285 million has been preliminarily allocated in the following manner: Approximately $75 million to intangible assets comprising multi-channel video programming distributor affiliate agreements and relationships with useful lives of 12 years, advertiser relationships with useful lives of nine years and the Maa TV trade name with a useful life of 10 years; and the balance of the excess representing the goodwill on the transaction included in the cable network programming segment.
The goodwill reflects the synergies and increased market penetration expected from combining the operations of Maa TV and Star India.
In February 2015, Star had acquired the broadcast business of Maa Television Network, which includes four Telugu channels, namely Maa TV, Maa Music, Maa Gold and Maa Movies. In June that year, the Foreign Investment Promotion Board (FIPB) had given its nod to Star India’s proposal to acquire the broadcast business of Maa TV Network for Rs 2,500 crore (Rs 25 billion).
It may be recalled that the Minister of State in the Ministry of Information & Broadcasting Rajyavardhan Singh Rathore told the Lok Sabha in December that the Ministry of Home Affairs (MHA) had denied security clearance to eight companies including Maa TV Network in November.
Following the withdrawal of security clearance, the MIB issued a show-case notice to the company on 12 August. Subsequently, the letter was forwarded to the MHA on 7 December along with the company’s response.
Maa Television Network has four directors—Nagarjuna Rao Akkineni, Nimmagadda Prasad, Sohrab Kersasp Chinoy and Ram Charan Tej Konidala. In 2012, the CBI arrested Nimmagadda Prasad in connection with alleged illegal assets case involving YSR Congress Party leader YS Jaganmohan Reddy.
However, the denial of security clearance had no bearing on Star India as it had acquired only the broadcast business of the company. In December, the MIB had granted new licences to Star India for four channels, namely Maa TV, Maa Movies, Maa Music and Maa Gold.
The acquisition of Maa TV has helped Star to have presence in all the four key language markets in South India. Telugu was the only missing piece as Star already had presence in Tamil Nadu, Karnataka and Kerala through Star Vijay, Suvarna and Asianet, respectively. The Telugu TV ad market is pegged at Rs 1,800–2,000 crore.
At the time of announcing the acquisition, Star India CEO Uday Shankar had stated, “The acquisition fills a vital gap in our portfolio, allowing our advertisers targeted access to a critical market. Telugu is the second biggest C&S market and we didn’t have any offering in this language so this acquisition will fill in that gap.”