MUMBAI: Ronnie Screwvala promoted UTV Software Communications will be acquiring the remaining stake of approximately 23.18 per cent in its AIM listed entity UMP Plc for $195 million with a view to integrate its movie business and bring greater operational efficiencies. UTV holds a 77 per cent stake in UMP.

 

UTV is looking at consolidating the business of its subsidiaries – UMP and UTV Motion Pictures (Mauritius) into the company in order to reap benefits of operational synergy and enhance shareholder value.

 

UMP is the holding company of UTV Mauritius, which comprises the entire motion picture production business of the company.

 

The proposal, which values each UMP share at $1.87, offers a premium that is nearly twice the company’s Friday closing middle market price. UMP shareholders will get one UTV share for every 3.75 UMP shares.

With this, all the assets and business of UMP will be transferred to UTV and UMP will be dissolved (without winding up).

"In view of the ongoing working capital funding requirements of the movie production business, UTV considers that it would be preferable to have full ownership of the business and to seek investment as a single integrated movie business," UTV said.

 

UMP’s ordinary shares were admitted to trading on AIM on 2 July 2007. Approximately 76.82 per cent of the issued capital of UMP is owned by UTV. 

 

Further, as a result of this, UMP will be dissolved and application will be made to the London Stock Exchange for the cancellation of the UMP Shares from admission to trading on AIM. Listing of new UTV shares on Indian bourses – BSE and NSE – will be done towards the end of February 2010.

UTV chairman and managing director Rohinton Screwvala said, "I am pleased we have come to an agreement on this proposal and that the independent UMP directors have unanimously resolved to recommend it. The proposal provides substantially greater liquidity for the Independent UMP shareholders and access to enhanced prospects as part of the wider UTV Group."

UTV’s movie business, comprising its equity investment in UMP and its distribution networks across various platforms, is currently the most significant contributor to its overall revenues and profitability, and this is expected to continue for the foreseeable future. UTV is currently the sole provider to UTV (Mauritius) of a $64 million working capital debt facility, which is committed until March 2010 and repayable on 12 months’ notice from either party. The growth of the movie production business is likely to require substantial future funding and UTV is of the view that it is much more likely that funding will be available through the Indian equity markets having regard to the relative lack of liquidity in trading of the UMP Shares on AIM. In view of the ongoing working capital funding requirements of the movie production business (and the fact that UTV is the most likely source of funding for UMP), UTV considers that it would be preferable to have full ownership of the business and to seek investment as a single integrated movie business.

Whilst the intellectual property in movies is held in UTV(Mauritius), distribution (for the US, the UK and India) is already carried out by members of the UTV Group. Accordingly, UTV is of the view that the management of the movie business and the exploitation of its intellectual property rights would be enhanced if they were centralised in India.

Additionally, UTV considers that the implementation of the proposal will reduce the exposure of its movie business to the foreign exchange risk arising from UMP accounting and funding in US dollars but (amongst other things) incurring its costs in relation to procuring services from India, save time and costs resulting from maintaining an additional public quotation and simplify compliance with legal, regulatory and fiscal requirements across multiple jurisdictions. 

Shares of UMP rose 28 percent to 1.25 pence by 1229 GMT on the London Stock Exchange, while those of UTV closed up 7 percent at Rs 366 on the Bombay Stock Exchange.