Walt Disney offers to buy out UTV's rest 49.56% stake for Rs 2,000 cr

NEW DELHI:Walt Disney Co plans to buy the rest ofUTV Software Communications (UTV) it does not own and delist the company in a deal potentially valued at $454 million, or Rs 2,014 crore, as the US entertainment giant seeks to expand its presence in Bollywood, media and gaming.

The Burbank, California-based company, which owns 50.44% of UTV Software, said in a statement it would buy out public shareholders at a price not exceeding 1,000 per share, an 11% premium to Monday's stock closing price of Rs 901.8. The buyout will give Walt Disney control over five businesses.

UTV Software, a holding company, makes and distributes movies, broadcasts a clutch of movie and entertainment channels, produces content for television and other digital media, and also has a presence in gaming.

It operates through a number of subsidiaries, including movie production under UTV Motion Pictures, Indiagames, andUTV Global Broadcasting that broadcasts entertainment and movie channels. All these will become part of Walt Disney's Indian unit once the transaction is completed.

Following the news of the buyout, one of the biggest in India's media and entertainment industry, the company's stock closed at Rs 950.45, or 5.39% higher, on the Bombay Stock Exchange on Tuesday.

Disney said it would also buy the 20% stake held by promoter Rohinton (Ronnie) Screwvala and his associates if it garnered enough shares to delist the company. It, however, said delisting of a public company in India was a long process and could take several months to complete.

"Given the multiple stages and the nature of the process, a successful outcome is uncertain," it added.

The entertainment behemoth also said if the delisting went through, Screwvala would cease to be the chairman and managing director ofUTV Software Communications and become the managing director ofThe Walt Disney Company India, responsible for overseeing Indian businesses of theDisney Group.

Mahesh Samat, currently managing Disney's assets in India, will become chief operating officer, reporting to Screwvala. The statement did not say what would happen if the response to the open offer was insufficient to delist the company. Disney's statement merely said if the delisting was unsuccessful, it would "consider the full range of strategic options".

Farokh Balsara, partner & national leader, media & entertainment practice, at consultant Ernst & Young, said the deal illustrated the potential of the Indian movie and entertainment market. "It is an endorsement of the potential international companies see in the robust Indian entertainment and media sector. UTV and Disney are similar businesses and the acquisition will help Disney synergise its Indian operations. These are some of the bets international companies are making in the fast-growing Indian market."

India is the world's third-largest TV market trailing China and the US with nearly 138 million TV households, according to a March 2011 report by KPMG and industry lobby FICCI. The media and entertainment industry is likely to expand 14% annually until 2015, with segments such as TV, gaming and animation expected to outpace the industry growth, the report said.