Mumbai: Sony Pictures Television Inc. (SPT) will acquire a 32% stake in Multi Screen Media Pvt. Ltd (MSM), formerly known as Sony Entertainment Television, for $271 million (around Rs1,490 crore), taking its stake to 94%, reinforcing its control over the unit that runs television channels, and offering minority investors a long-awaited exit.
The Sony Pictures Entertainment Inc. unit will acquire the stake from minority stakeholders Grandway Global Holdings Ltd and Atlas Equifin Pvt. Ltd, the company said in a statement on Thursday. SPT is expected to pay $145 million at the close of the acquisition, which is subject to approvals, by end-December. The remaining $126 million is to be paid in three equal annual instalments starting from the fiscal year ending 31 March 2014, according to the company.
“SPT has enjoyed great success with our channels in India and this acquisition further demonstrates our commitment to entertaining Indian audiences,” Andy Kaplan, president, worldwide networks, SPT, said in the statement. “We’d especially like to thank Grandway and Atlas for their entrepreneurial spirit that helped to get this venture off the ground 17 years ago.”
MSM runs a network of television channels in India—Hindi entertainment channel Sony Entertainment Television (SET), movie channel SET Max, music channel MIX, and SAB TV. MSM also holds the official broadcasting rights for the Indian Premier League cricket tournament until 2017. The company acquired a 30% stake in Maa Television Network that operates four Telugu channels.
Expansion drive: MSM chief executive Man Jit Singh. Photo: Abhijit Bhatlekar/Mint
With SPT increasing its stake in MSM, “the company now has the strength to expand its footprint”, said Man Jit Singh, chief executive of MSM.
“We will continue to invest in the regional television channels market,” he said. “Our investment in Maa Television Network is in that direction. We are open to acquisition opportunities in the regional space, else we will launch new channels.” The company has no plan to list on the Indian stock exchanges, Singh added.
A substantial portion of the impact of the acquisition has already been included in Sony Corp.’s consolidated financial forecasts for the fiscal year ending 31 March, 2013, and no material impact from the acquisition is anticipated on such forecasts.
Minority stakeholders Sudesh Iyer, Jackie Shroff and Raman Maroo held their investment through Grandway Global Holdings and Atlas Equifin (combined 32%), confirmed Singh. The Indian minority stakeholders have been looking for an exit for the last five years.
With the company raising its stake to 94%, the remaining stakes are with funds such as Emerging Markets Growth Fund, Capital International Emerging Markets Fund, The New Economy Fund and American Funds Insurance Series.
Raman Maroo, director, Atlas Equifin, could not be reached for a comment.
“It is a decent exit for the minority stakeholders,” said a person close to the development who didn’t want to be identified. “In the next two years MSM’s valuation will increase by 40-50% from the current figure of nearly $850 million.”
The person noted that SPT’s decision to increase its stake in MSM comes at a time when the roll-out of digital addressable system is expected to increase subscription revenue two-fold in the coming two years. “This will help keep incremental revenues within the company,” he pointed out.
In 2008, the minority stakeholders locked horns with overseas partners over an additional capital call of $40 million to repay a loan taken by the media company to finance its bid for coverage of the 2003 Cricket World Cup. Consequently, the minority stakeholders filed a petition in the Bombay high court. In its petition, the Indian stakeholders said MSM was ignoring their suggestion for an initial public offering of shares to raise funds required for the company’s operations and expansion.
The matter was resolved when the Indian shareholders agreed to pay $12.66 million, following which the court disposed of the petition.
“The minority stakeholders have been waiting for an exit for almost six-seven years now. This transaction finally puts an end to the option of selling out to a third party which would have hampered MSM. This also is a signal that Sony continues to be interested in the television broadcast business in India,” said Nikhil Vora, managing director of IDFC Securities Ltd.