Mukesh Ambani's RIL, Disney Preparing Term Sheet To Merge India Operations: Report

Mukesh Ambani-owned Reliance Industries and Walt Disney Co. are finalizing details of a non-binding term sheet to merge their Indian media and entertainment operations, reported The Economic Times on Tuesday quoting executives involved in the deal.

The deal is expected to give Reliance Group a controlling stake in what will become the country's largest media and entertainment conglomerate if the deal materializes.

According to the report citing sources, as of now the plan is to create a step-down subsidiary of RIL's Viacom18, which will absorb Star India through a stock swap. Reliance is pitching to be the larger shareholder with at least 51% in the merged entity with Disney owning the remaining 49%, they said. Since both businesses are considered equal in size, RIL is likely to pay cash for the controlling stake.

The two companies are also discussing a business plan to infuse cash as immediate capital investment, estimated to be around $1-1.5 billion. The final shareholding structure of the merged entity will get crystallized and its value established based on the cash infusion from each of the parties.

Manoj Modi, Ambani's key adviser, is fronting negotiations for RIL, with the group's M&A team.

In October, Bloomberg reported that Reliance's broadcast venture Viacom18 runs JioCinema valued Disney's India assets, which comprises the Disney+ Hotstar streaming service and Star India, at between $7 billion and $8 billion.
The US firm is also expected to provide the joint venture company a 5-year license for exclusive subscription video on demand (SVOD) content for Disney+ originals and its library content.

A five-year lock-in, barring the case of an IPO of the merged entity, is also expected to be agreed upon. Distribution channels and Jio Platforms are also to be made available to the joint venture on mutually agreed terms. A list of competitors with which any engagement is to be prohibited will be also drawn up.

Upon signing the term sheet, there is likely to be a 45-to-60-day exclusivity that can be mutually extended.