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ZEEL to gobble up Anil Ambani’s TV biz for price consideration of Rs 298.4 cr

MUMBAI: Continuing with its regional expansion strategy, Zee Entertainment Enterprises Ltd (ZEEL) has agreed to gobble up the TV broadcasting business of Anil Ambani-promoted Reliance Group for a price consideration of Rs 298.4 crore (Rs 2.98 billion).

The deal will give ZEEL ownership of two entertainment channels, Big Magic and Big Ganga, and four additional TV channel licences. It will also mark the entry of the Subhash Chandra-promoted company into the Bhojpuri market through Big Ganga.

mihir-modi“Big Ganga will give us an entry into the Bhojpuri-language GEC market. Big Magic is a comedy genre GEC. So we get two different kinds of channels. The addition of Big Ganga and Big Magic to ZEEL’s portfolio is in line with our strategy of expansion into regional markets and newer categories,” ZEEL chief finance and strategy officer Mihir Modi told TelevisionPost.com.

ZEEL’s acquisition price will be neutralised by a tax benefit of Rs 220 crore (Reliance’s TV business has accumulated loss of Rs 650 crore) and Cenvat credit of Rs 60 crore (as on 31 March 2016).

Reliance’s TV business is expected to post a revenue of Rs 75-90 crore in FY17, up from Rs 49 crore in FY16. In the first half of FY17, the two channels garnered a revenue of Rs 37 crore. The operational loss of Rs 25-35 crore will have turned around and breakeven achieved by the time ZEEL consumes the deal.

Zeel Big Magic + Big Ganga consolidated Revenues (Rs Cr)
The transaction is expected to close in the second half of 2017. The appointed date of the demerger scheme is 31 March 2017. The transaction will require approvals of SEBI/stock exchanges, the Ministry of Information & Broadcasting (MIB), Bombay High Court and the companies’ shareholders.

Reliance also operates a news and current affairs channel, BTVi, which is not part of the transaction.

Transaction details

ZEEL will acquire the TV business of Reliance Group through a court-approved demerger process.

As per the transaction structure, Reliance Group’s entities Big Magic Ltd (BML), Reliance Big Broadcasting Pvt Ltd (RBBL) and Azalia Broadcast Pvt Ltd (ABPL) will get demerged into ZEEL.

Zeel Transaction Structure

ZEEL will pay the consideration by assuming debt of the demerged entities (around Rs 295 crore) and issuing 6% unlisted preference shares (aggregating to Rs 3.95 crore) redeemable within three years.

ZEEL Purchase Consideration

Benefits of the deal

The acquisition will help ZEEL solidify its presence in the Hindi-speaking market (HSM) through comedy GEC Big Magic, besides giving it access to the growing Bhojpuri market through Big Ganga. The acquisition will help ZEEL to fill up another gap in its regional portfolio.

The only missing piece in the ZEEL jigsaw is a Malayalam GEC. The company, which has been considering entering that market for quite some time, will now seriously look at opportunities as it has already cracked the Tamil market.

This is ZEEL’s second acquisition in the regional space. Earlier, it had acquired Odia GEC Sarthak TV for Rs 115 crore. Sarthak is Odisha’s leading GEC.

So what does the new acquisition bring to the table for ZEEL?

Big Magic will add comedy to the genre pool of ZEEL channels while Big Ganga syncs well with the company’s regional expansion strategy. Marrying strong distribution with diversified content, the two channels have carved a niche for themselves in a crowded marketplace.

The revenues of the two Reliance channels have been steadily increasing over the years. The addition of these channels to the Zee bouquet will give a boost to their financials.

Big Magic offers diverse content in the comedy genre such as sitcoms, historical comedies, weekend specials, stand-up acts and comedy blockbuster movies. The key shows on the channel include ‘Akbar Birbal’, ‘Family Fortunes’, ‘Fakebook with Kavita’ and ‘Comedy Ka Rocket’.

The channel is available in all 0.1 to 1 million and LC1 HSM markets with availability on all major cable TV and direct-to-home (DTH) platforms. It enjoys a reach to 85 million homes across the country. It is present in the neighbourhood of top eight channels on most platforms. It also has an international footprint with availability in the USA and Canada besides digital platforms such as Apalya and dittoTV.

Zeel TVTs of Big Magic on a clear uptick

Big Ganga, on the other hand, is a leading Bhojpuri channel with a market share of more than 50% in Bihar and Jharkhand. It has extensive distribution in the deepest pockets in Bihar, Jharkhand and the Purvanchal region of Uttar Pradesh. It has successfully enhanced the authentic regional flavour and culture. It reaches 100% cable-connected households in the region and is available on all major DTH operators.

Zeel Big Ganga A clear leader

ZEEL will get six TV channel licences through the acquisition. RBNL holds five TV licenses (including Big Magic and Big Ganga) and Azalia holds one licence. The licences will get transferred to ZEEL through the demerger scheme. All the related assets and liabilities including the trademarks will also get transferred to ZEEL.

ZEEL owns and operates 36 domestic and 40 international channels. It has more than one billion viewers in 171 countries. Its content library is comprised of 222,000+ hours of content and 3,818 movie titles.

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