RE: Zee to buy Reliance Broadcast Network for Rs 2,000 cr
Zee Media to enter FM radio biz via acquisition of 49% stake in Anil Ambani’s Big FM
Subhash Chandra-promoted Essel Group is entering the FM radio space through the acquisition of 49% stake in Anil Ambani’s radio company and the option to buy out the remaining 51% after the three-year lock-in period.
The stake acquisition of the FM radio business (92.7 Big FM) will be carried out through Essel’s TV news broadcast company Zee Media Corporation Ltd (ZMCL), and not Zee Entertainment Enterprises Ltd (ZEEL), which runs the company’s entertainment business. This is because of the capping of the FDI limit in FM radio at 49%.
“ZEEL could not have acquired the radio business due to the FDI limit. Being a news broadcasting company, ZMCL itself falls under FDI regulations and can easily absorb the radio business,” a senior executive said.
Reliance Broadcast Network Ltd (RBNL) will transfer 45 operational and 14 new and non-operational licences to newly incorporated special-purpose vehicles (SPVs) Vrushvik Entertainment Pvt Ltd (VEPL) and Azalia Media Services Pvt Ltd (AMSPL) respectively, through business transfer agreements (BTA). ZMCL will acquire 49% shares in VEPL and AMSPL.
ZMCL and Reliance Land Pvt Ltd (RLPL), which will hold the remaining 51% in the two SPVs, will have a call and put option respectively for the balance 51% after expiry of the lock-in period. The call/put option can be exercised between April 2018 and 2020.
The companies will need the approval of the Ministry of Information & Broadcasting (MIB) for the transaction, which is expected to be completed by the first half of 2017.
Total consideration of buyout is Rs 1,592 crore
The total consideration of the transaction is valued at Rs 1,592 crore (Rs 15.92 billion). Out of this, the BTA between RBNL and VEPL itself is valued at Rs 1,420 crore while the BTA between RBNL and AMSPL is Rs 150 crore. The SPA for 49% in VEPL and AMSPL is Rs 10 crore. Similarly, the call/put option for 51% stake in the two SPAs stands at Rs 12 crore.
The lock-in for the 45 operational licenses that will be transferred to VEPL will expire, while the lock-in period will for 14 new non-operational licences is expected to expire by March 2020. This means that the licences will be operationalised next year.
Revenue gains
ZMCL will be immediately able to scale up its revenues through the acquisition. The target will be to touch the Rs 1000 crore milestone.
In FY16, the combined revenue of ZMCL and Big FM stood at Rs 740 crore.
While Big FM posted a revenue of Rs 305 crore, ZMCL’s income was at Rs 435 crore.
In the first half of FY17, the combined revenue reached Rs 347 crore.
In FY16, the combined EBITDA of ZMCL and Big FM touched Rs 194 crore.
While Big FM reported EBITDA of Rs 116 crore, ZMCL’s operating profit was Rs 78 crore.
In the first half of FY17, the combined EBITDA stood at Rs 98 crore.
Other benefits of the deal
For ZMCL, whose primary business is news broadcasting, the acquisition will allow diversification into a new vertical. The additional of FM radio will also offer increased complementary and supplementary audience reach, thereby enabling engagement with advertisers at both national and local levels.
Additionally, the company will have access to a large ‘ready’ radio network, thus cutting the gestation period to build from scratch. Big FM is the largest radio network operator in India with 45 stations acquired under Phase II and 14 stations under Phase III. It covers 1,200 + towns and 52,000+ villages with an audience reach of 43 million listeners per week. It services 1,600 brands a month.
The acquisition is also expected to expand the news broadcaster’s regional base and to exploit synergies in terms of content and ad sales. FM radio’s high operating margins will also bolster the company’s balance sheet.
ZMCL will account for 49% of 92.7 Big FM results in FY18 for VEPL and AMSPL, and 100% in FY19 for VEPL (once the call/put option is exercised) subject to regulatory approvals.
Commenting on the stake acquisition in Big FM, ZMCL COO Rajiv Singh said, “This acquisition will not only be complementary to our current business but accelerate its growth too. We are currently running successfully a bouquet of 11 news and current affair channels, and with the addition of 59 radio licences, we will be reaching out to a much increased audience base and will keep them engaged on different media platforms. This acquisition will bring about the desired business diversity and help in achieving the sound financial objectives at an accelerated pace. We are confident that this investment will enhance value for all stakeholders and look forward to this exciting journey to take the company to the next level.”
This is the second business diversification for ZMCL as the company had earlier entered the TV shopping and e-commerce vertical by acquiring 80% stake in India Today Group’s loss-making e-commerce and TV shopping entities for Rs 165.78 crore (Rs 1.66 billion) in tranches spread over four years. The company is planning to launch a home-shopping channel.
Even as it is diversifying into other verticals, it is demerging the print business comprising English daily dna with the intention of listing it separately on the bourses.
ZMCL’s TV business comprises 10 news channels including three national and seven regional channels reaching an estimated 281.7 million viewers.
Zee Media to enter FM radio biz via acquisition of 49% stake in Anil Ambani’s Big FM | TelevisionPost.com
Zee Media to enter FM radio biz via acquisition of 49% stake in Anil Ambani’s Big FM
Subhash Chandra-promoted Essel Group is entering the FM radio space through the acquisition of 49% stake in Anil Ambani’s radio company and the option to buy out the remaining 51% after the three-year lock-in period.
The stake acquisition of the FM radio business (92.7 Big FM) will be carried out through Essel’s TV news broadcast company Zee Media Corporation Ltd (ZMCL), and not Zee Entertainment Enterprises Ltd (ZEEL), which runs the company’s entertainment business. This is because of the capping of the FDI limit in FM radio at 49%.
“ZEEL could not have acquired the radio business due to the FDI limit. Being a news broadcasting company, ZMCL itself falls under FDI regulations and can easily absorb the radio business,” a senior executive said.
Reliance Broadcast Network Ltd (RBNL) will transfer 45 operational and 14 new and non-operational licences to newly incorporated special-purpose vehicles (SPVs) Vrushvik Entertainment Pvt Ltd (VEPL) and Azalia Media Services Pvt Ltd (AMSPL) respectively, through business transfer agreements (BTA). ZMCL will acquire 49% shares in VEPL and AMSPL.
ZMCL and Reliance Land Pvt Ltd (RLPL), which will hold the remaining 51% in the two SPVs, will have a call and put option respectively for the balance 51% after expiry of the lock-in period. The call/put option can be exercised between April 2018 and 2020.
The companies will need the approval of the Ministry of Information & Broadcasting (MIB) for the transaction, which is expected to be completed by the first half of 2017.
Total consideration of buyout is Rs 1,592 crore
The total consideration of the transaction is valued at Rs 1,592 crore (Rs 15.92 billion). Out of this, the BTA between RBNL and VEPL itself is valued at Rs 1,420 crore while the BTA between RBNL and AMSPL is Rs 150 crore. The SPA for 49% in VEPL and AMSPL is Rs 10 crore. Similarly, the call/put option for 51% stake in the two SPAs stands at Rs 12 crore.
The lock-in for the 45 operational licenses that will be transferred to VEPL will expire, while the lock-in period will for 14 new non-operational licences is expected to expire by March 2020. This means that the licences will be operationalised next year.
Revenue gains
ZMCL will be immediately able to scale up its revenues through the acquisition. The target will be to touch the Rs 1000 crore milestone.
In FY16, the combined revenue of ZMCL and Big FM stood at Rs 740 crore.
While Big FM posted a revenue of Rs 305 crore, ZMCL’s income was at Rs 435 crore.
In the first half of FY17, the combined revenue reached Rs 347 crore.
In FY16, the combined EBITDA of ZMCL and Big FM touched Rs 194 crore.
While Big FM reported EBITDA of Rs 116 crore, ZMCL’s operating profit was Rs 78 crore.
In the first half of FY17, the combined EBITDA stood at Rs 98 crore.
Other benefits of the deal
For ZMCL, whose primary business is news broadcasting, the acquisition will allow diversification into a new vertical. The additional of FM radio will also offer increased complementary and supplementary audience reach, thereby enabling engagement with advertisers at both national and local levels.
Additionally, the company will have access to a large ‘ready’ radio network, thus cutting the gestation period to build from scratch. Big FM is the largest radio network operator in India with 45 stations acquired under Phase II and 14 stations under Phase III. It covers 1,200 + towns and 52,000+ villages with an audience reach of 43 million listeners per week. It services 1,600 brands a month.
The acquisition is also expected to expand the news broadcaster’s regional base and to exploit synergies in terms of content and ad sales. FM radio’s high operating margins will also bolster the company’s balance sheet.
ZMCL will account for 49% of 92.7 Big FM results in FY18 for VEPL and AMSPL, and 100% in FY19 for VEPL (once the call/put option is exercised) subject to regulatory approvals.
Commenting on the stake acquisition in Big FM, ZMCL COO Rajiv Singh said, “This acquisition will not only be complementary to our current business but accelerate its growth too. We are currently running successfully a bouquet of 11 news and current affair channels, and with the addition of 59 radio licences, we will be reaching out to a much increased audience base and will keep them engaged on different media platforms. This acquisition will bring about the desired business diversity and help in achieving the sound financial objectives at an accelerated pace. We are confident that this investment will enhance value for all stakeholders and look forward to this exciting journey to take the company to the next level.”
This is the second business diversification for ZMCL as the company had earlier entered the TV shopping and e-commerce vertical by acquiring 80% stake in India Today Group’s loss-making e-commerce and TV shopping entities for Rs 165.78 crore (Rs 1.66 billion) in tranches spread over four years. The company is planning to launch a home-shopping channel.
Even as it is diversifying into other verticals, it is demerging the print business comprising English daily dna with the intention of listing it separately on the bourses.
ZMCL’s TV business comprises 10 news channels including three national and seven regional channels reaching an estimated 281.7 million viewers.
Zee Media to enter FM radio biz via acquisition of 49% stake in Anil Ambani’s Big FM | TelevisionPost.com
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