Reliance, Disney join to build India's largest media and entertainment business

In a significant development, Reliance Industries, led by Mukesh Ambani, has reportedly entered into a non-binding agreement with Walt Disney Co for a merger, aimed at creating India's largest media and entertainment business. The proposed merger, structured at a ratio of 51:49 in terms of stock and cash, is anticipated to be finalized by February, with Reliance expressing a desire to conclude the deal by the end of January.

According to sources, the negotiation process involved key figures, including Kevin Mayer, a former Disney executive and current advisor, and Manoj Modi, a close confidante of Mukesh Ambani. The meeting, held in London last week, marked the signing of a non-binding term sheet.

As part of the merger plan, an independent valuation exercise is set to commence shortly. The strategy involves establishing a step-down subsidiary of Reliance Industries' Viacom18, which will absorb Star India through a stock swap.

In terms of ownership in the merged entity, Reliance is expected to be the majority shareholder, holding at least 51%, while Disney will own the remaining 49%. JioCinema, a streaming service under Reliance Jio, is also slated to be included in the deal. The controlling stake held by Reliance is likely to be acquired through cash payments.

The board of the merged company is anticipated to feature equal representation from Reliance and Disney. Uday Shankar-led Bodhi Tree, the second-largest shareholder in Viacom18 after Reliance, is expected to secure a seat on the board. Additionally, the inclusion of a minimum of two independent directors is reportedly under consideration.

It's worth noting that Disney's India business recently lost the online rights to the Indian Premier League (IPL) tournament from 2023-2027, while JioCinema secured the online streaming rights, despite Disney winning the broadcast TV rights.

The valuation process, subsequent negotiations, and regulatory approvals will play crucial roles in shaping the final contours of this major merger in the Indian media and entertainment sector.