Shares of Reliance Industries (RIL) rose nearly 2% in early trade on Thursday after the oil-to-telecom conglomerate signed an agreement with Walt Disney Co. to form a joint venture to merge their India entertainment operations -- Viacom18 and Star India. The transaction values the joint venture at ₹70,352 crore ($8.5 billion) on a post-money basis, excluding synergies.
According to global brokerage Jefferies, the Reliance-Viacom18-Disney deal will add ₹40 per share to RIL’s sum-of-the-parts valuation (SOTP). "Disney's business valuation, often overestimated in media reports, is substantially lower than perceived, adding an estimated ₹40 per share to RIL's SOTP," Jefferies says in a report.
Boosted by the deal, shares of RIL rose as much as 1.7% to ₹2,958 on the BSE, while the market capitalisation rose to ₹19.9 lakh crore. Early today, Reliance shares opened higher at ₹2,931.05 against the previous closing price of ₹2,909 per share.
RIL shares have witnessed strong momentum in the calendar year 2024, with the share price rising over 13% year-to-date (YTD), driven by robust December quarter earnings. The bluechip stock touched its new record high of ₹2,999.85 on February 27, 2024, while its market capitalisation crossed ₹20 lakh crore. The country’s most valued stock has risen 47% against its 52-week low of ₹2,012.14 touched on march 20, 2023.
In a post market release on Wednesday, RIL officially announced that it has entered into an agreement with Disneys to merge their digital streaming and television assets in India to create a world class leader across entertainment and sports. As part of the transaction, the media undertaking of Viacom18, a part of RIL, will be merged into Star India Private Limited through a court approved scheme of arrangement. In addition, RIL has agreed to invest at closing ₹11,500 crore ($1.4 billion) into the JV for its growth strategy.
As part of the deal, the JV will be controlled by RIL and owned 16.34% by RIL, 46.82% by Viacom18, and 36.84% by Disney. Nita M. Ambani will be the Chairperson of the JV, with Mr. Uday Shankar as Vice Chairperson providing strategic guidance to the JV.
Disney may also contribute certain additional media assets to the JV, subject to regulatory and third-party approvals, as per the release.
The JV will also be granted exclusive rights to distribute Disney films and productions in India, with a license to more than 30,000 Disney content assets, providing a full suite of entertainment options for the Indian consumer.
Mukesh D Ambani, Chairman & Managing Director of Reliance Industries, said this strategic joint venture will “help us pool our extensive resources, creative prowess, and market insights to deliver unparalleled content at affordable prices to audiences across the nation.”
Bob Iger, CEO of The Walt Disney Company said, “India is the world’s most populous market, and we are excited for the opportunities that this joint venture will provide to create long-term value for the company.”
The transaction is subject to regulatory, shareholder and other customary approvals and is expected to be completed in the last quarter of Calendar Year 2024 or first quarter of Calendar Year 2025.
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