Walt Disney ups stake in UTV to 32.1%

MUMBAI: The Walt Disney Company (Southeast Asia) has increased its stake in Ronnie Screwvala’s UTV Software Communications to 32.1 per cent with an investment of approximately Rs 8.05 billion (Rs 805 crores).

Earlier Walt Disney had acquired UTV’s kids channel Hungama TV for Rs 44.5 million and also a 14.85 per cent stake in UTV Software Communications.

With today’s development, Disney will also strengthen its foothold in the Indian motion picture business as UTV Software Communications holds 77 per cent in United Motion Pictures (UMP) Plc, which is listed on London Stock Exchange’s Alternative Investment Market (AIM). Disney had inked a deal with Yash Raj Films last year for animation films. The first movie under this JV titled Roadside Romeo is slated to release later this year. UTV has as many as 18 film releases in 2008, the first being Jodhaa Akbar, which was released last week (15 February).

“The deal with Yash Raj Films only entails animation movies. We are also in talks with other Indian producers to enter into similar alliances in the motion picture business in India,” informs Walt Disney International chairman Andy Bird.

Additionally, Disney will also invest in UTV Global Broadcasting Ltd (UGBL) by acquiring a 15 per cent stake worth Rs 1.19 billion (Rs 118.98 crores), thus valuing UGBL at Rs 8 billion (Rs 800 crores). Disney’s investments in UTV and UGBL, together with the warrants to be issued to Screwvala’s promoter group (Unilazer), of Rs 3.90 billion (Rs 390 crores) after exercise, makes this total deal size about Rs 13.14 billion (Rs 1314 crores). Additionally, the UGBL Warrants may convert into additional equity shares such that Disney has an aggregate holding of 37.5 per cent of the share capital of UGBL. Screwvala will hold 10 per cent of the shares of UGBL.

“The fresh money infusion will take care of current funding needs at the parent and subsidiary company level,” says Screwvala.

Disney will be allotted 93,52,500 equity shares at a price of Rs 860.79 per share. The company presently holds 34,00,000 equity shares, representing 14.85 per cent of the equity share capital of the company. With this, Screwvala’s share in the company stands at 32.1 per cent. “However, there will be no in change in control of the company post this development,” Screwvala says.

The Walt Disney Company will also make an open offer for a further 20 per cent, which may thereby up its stake in UTV Software Communications to 52.1 per cent. Unilazer and certain other promoters of the company would also be required to make an open offer to the public shareholders of the company under the Securities and Exchange Board of India. The open offer will be made at Rs 860.79 per share. “We can’t estimate the time of the open offer in line with approvals from SEBI. However, whatever comes up in the open offer, we have the opportunity to acquire those shares over the next four years,” informs Screwvala.

Hence Disney’s stake in UTV for the next four years is capped at 32.1 per cent.

UTV will also invest Rs 2.40 billion (Rs 240 crores) for a 75 per cent stake in UGBL. The remaining 10 per cent will continue to be held by Screwvalaâ€™s Promoter Group. UGBL is the parent company for its two wholly owned subsidiaries, Genx Entertainment Limited and UTV Entertainment Television Limited. Genx has already launched two youth entertainment channels through the Bindass brand, whilst UTV Television Entertainment Limited has just launched The World Movies channel and will be launching a Hindi movie channel for which awaiting license from the ministry of information and broadcasting.

The Hindi movie channel from UTV will go on air from 26 February, 2008. “The movie channel will go on air from 26 February. We already have a strong distribution tie-up for the channel in India and internationally,” says Screwvala. Additionally, the company’s English business news channel will also be launched in March this year.

Screwvala says, â€œThis partnership with Disney across movies, TV content, interactive and broadcasting endorses our leadership position in India and South East Asia and propels our already growing global story. Over the last year we have learnt to work well together and the speed at which this collaborative deal was put together is testament to the strong working relationship we have built.â€

Bird says, â€œWe are pleased with our initial investment in UTV, which has strong local brands and media properties that provide complementary growth platforms to Disneyâ€™s existing branded efforts. The UTV management team is proven and well-respected, and we look forward to continue to work with them.â€

At the time of filing this report, UTV Software Communications’ scrip was trading at Rs 835.95, down 3.08 per cent (Rs 26.55) from its previous close of Rs 862.50. The stock opened today at Rs 905.00 and touched an intra-day high of Rs 948.75 and a low of Rs 830.00.

Q4 OUTLOOK FOR MOTION PICTURE BUSINESS

As has already been reported by Businessofcinema.com earlier this month, UMP has a slate of at least 14 movies for release in 2008.

Apart from Ashutosh Gowarikar’s Jodhaa Akbar, Race, Wednesday, Aamir, Phir Kabhi, Hawai Dada, M Night Shyamalan’s The Happening, Kismat Konnection, Bombay Meri Jaan, Shyam Benegal’s Mahadev Ka Sajjanpur, Dhoondte Reh Jaaoge, Anurag Kashyap’s Dev D, Madhur Bhandarkar’s Fashion and Shoojit Sarkar’s Shoebite, the company has another five movies in the pipeline.

The other movies are Star directed by Ken Ghosh starring Shahid Kapur; Main Aur Mrs. Khanna directed by Prem Soni that stars Salman Khan, Kareena Kapoor and Sohail Khan; Oye Lucky! Lucky Oye! directed by Dibakar Banerjee and starring Abhay Deol, Paresh Rawal and Neetu Chandra; 7G Rainbow Colony directed by Selva and starring Vivek Oberoi; Kisaan (produced by Sohail Khan Productions) directed by Puneet Sira with Jackie Shroff, Arbaaz Khan, Dia Mirza and Sohail Khan in the cast.

“The growth story for UMP will be by alliances either in terms of co-productions with other companies or by tying up with various directors and actors,” says Screwvala.