Reliance acquires controlling stake in DEN, Hathway for Rs 5,230 cr

MUMBAI: Reliance Industries Ltd (RIL) has acquired controlling stakes in two of India’s leading cable TV and broadband companies DEN Networks and Hathway Cable and Datacom as part of its plan to launch JioGigaFiber in 50 million homes.

The Mukesh Ambani-led company will pump in Rs 5,230 crore to take control of the two companies.

RIL has picked up 66% stake in DEN Networks for Rs 2290 crore which includes primary investment of Rs 2,045 crore through a preferential issue and secondary purchase of Rs 245 crore from the existing promoters.

The oil to telecom conglomerate has also made primary investment of Rs. 2,940 crore through a preferential issue 51.3% stake in Hathway Cable and Datacom.

The company will also make open offers in DEN and Hathway as well as GTPL Hathway, a company jointly controlled by Hathway with 37.3% stake, and Hathway Bhawani Cabletel and Datacomm, a subsidiary of Hathway.

DEN board has approved the allotment of 28,14,48,000 equity shares of face value Rs 10 each at an issue price of Rs. 72.66 per equity share on preferential basis to RIL subsidiries Jio Futuristic Digital Holdings, Jio Digital Distribution Holdings, and Jio Television Distribution Holdings.

The existing promoters Sameer Manchanda, Lucid Systems and Verve Engineering hhave entered into a share purchase agreement (SPA) for sale of 3,35,85,000 equity shares of the company at a per share price of Rs. 72.66 to Jio Futuristic Digital Holdings.

Further, Goldman Sachs is also exiting DEN by terminating the investment agreement dated 6 May, 2013 and the share subscription agreement dated 20 September, 2016 amongst the parties

Goldman Sach through its affiliates Broad Street Investments (Singapore) Pte Ltd, MBD Bridge Street 2013 Investments (Singapore) Pte Ltd, MBD Bridge Street 2016 Investments (Singapore) Pte had invested $110 million in 2013 followed by an additional $21.2 million 2016.

The Hathway board has also approved the allotment of 90,88,10,000 equity shares of face value Rs. 2 each of the company at an issue price of Rs. 32.35 per equity share on preferential basis.

In connection with the proposed preferential allotment, the parties have executed a SSA and SHA between the company, the promoter group comprising Akshay Rajan Raheja, Viren Rajan Raheja, Hathway Investments, Spur Cable and Datacom and Jio Content Distribution, Jio Internet Distribution and Jio Cable and Broadband Holdings.

The two companies noted that the execution of the SSA shall attract an obligation on the Investors to make an open offer to the shareholders of the Company under applicable provisions of the SEBI (Substantial Acquisition and Takeovers) Regulation, 2011.

Subject to approval of the shareholders, the authorised share capital of DEN will increase from Rs. 200 crore to Rs. 500 crore while Hathway’s authorised share capital will go up from Rs. 200 crore to Rs. 400 crore.

Both DEN and Hathway will hold extra ordinary general meeting on 14 November to get the transaction approved from the shareholders.

RIL CMD Mukesh Ambani commented, “We are glad to join hands with Shri Rajan Raheja and Shri Sameer Manchanda, two of the pioneers in the MSO industry. Our investments in DEN and Hathway create a win-win-win outcome for the LCOs, customers, content producers and the eco-system. With Local Cable Operators now as part of the Jio ecosystem, we look forward to bringing Jio’s advanced JioGigaFiber and Smart Home Solutions to more Indian homes, even quicker. We look forward to welcoming other MSOs and LCOs to be part of this partnership. This will result in growing wireline data connectivity in India and making state-of-the-art highspeed affordable internet and digital services accessible to the widest population in the shortest possible time.”

In a statement, RIL said it will work with the management teams in the respective companies to further strengthen and improve business operations.

After having taken India to the top position in the mobile broadband space, Reliance said it is now committed to take India from a global rank of 135th to among the top-3 countries in the world on wireline digital connectivity.

The company said the investments and partnerships will create a win-win outcome for the Local Cable Operators (LCOs), Consumers, Content providers and overall eco-system.

Through this transaction, Reliance and Jio will be strengthening the 27,000 LCOs that are aligned with DEN and Hathway to enable them to participate in the digital transformation of India through (a) access to superior back-end infrastructure; (b) tie-ups with content producers; (c) access to latest business platforms to improve business efficiencies and deliver customer experience; and (d) investment in digital infrastructure for connecting customers. And the LCOs will continue to do what they do best – provide localised, intimate, people-friendly and ultra-fast customer services. This will create multiple future opportunities for LCOs as Jio rolls out new services and platforms.

Jio shall bring JioGigaFiber to more than 50 million homes across 1,100 Indian cities and towns, in the shortest possible time.

Jio has already started work on connecting 50 million homes across 1,100 cities. It will work together with Hathway and DEN and all the LCOs to offer a quick and affordable upgrade to a world-class lineup of JioGigaFiber and Jio Smart-Home Solutions to the 24 million existing cable connected homes of these companies across 750 cities. This will accelerate Jio’s commitment to connect 50 million homes with JioGigaFiber in the shortest possible time.

As on 30 June, DEN had 7.2 million cable TV and 1.06 lakh broadband customers while Hathway had 7.2 million cable TV and 0.77 million broadband customers.

JioGigaFiber will offer: a) Ultra High Definition Entertainment on large screen TVs, b) Multi-Party Video Conferencing from the comfort of everyone’s living room c) Artificial Intelligence, in the form of voice-activated virtual assistants, who obey every command of the consumer, d) Virtual Reality Gaming and Digital Shopping in a magical universe of immersive experiences, e) Smart-Home Solutions, where hundreds of devices like security cameras, home appliances, even lights and switches, can be securely controlled by their owners, from both inside and outside their homes, and f) Fixed Mobile Convergence, to offer end-to-end services on an integrated network.

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