CA Media acquires 49% stake in Endemol India

The Netherlands-based Endemol LV is the world’s largest independent production company.

The alliance will seek to build Endemol India into a valuable content company across television, films and digital platforms, said Rajesh Kamat, chief executive of CA Media India, after announcing the fund’s first investment in the country.

Building resources: CA Media founder Peter Chernin. Photo: Matthew Staver/Bloomberg

“Content companies that have scale and hold intellectual property will be of interest to investors," said Jehil Thakkar, head of media and entertainment at KPMG. “Clearly companies that own international formats rather than those who just execute content are more valuable. These IP formats can be leveraged across languages."

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Rajesh Kamat talks about CA Media’s decision to pick up a stake in Endemol India and Only Much Louder.

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Deepak Dhar, who will continue as the managing director of Endemol India, declined to disclose the value of the transaction.

CA Media may have paid ₹ 180-200 crore for the 49% stake, according to a media industry analyst, who did not want to be identified.

Dhar and Kamat declined to confirm the figure. “Endemol would not let go of 49% share for a small sum," said Dhar.

A few days ago Peter Chernin’s TCG secured nearly $200 million in new funds from a group of investors led by Providence Equity Partners, reported the Financial Times. The report cited Chernin as saying that the new partnership will have the resources to pursue “any deal of any size" around the world, from making multi-billion-dollar bids to incubating start-ups. Its first potential deals were “very close" and could be announced within weeks," it said.

Kamat did not confirm if Chernin was referring to the Endemol transaction. The investment in Endemol India made sense because the media and entertainment industry in India is still growing at 14% a year and it is among the biggest content producers for television, said Kamat.

“We are among the largest production houses in the country today. We are very low-profile but we do 2,000 hours of programming every year," said Dhar. The company is the biggest producer of reality shows and also entered regional language programming a year ago.

The money infused into the company will be used for growth—to get into film production, to make content digital platforms and to buy smaller production units.

“CA Media’s investment in Endemol is good news for the sector. Any organized investment means better process, people and capabilities," said Sanjay Gupta, chief operating officer of Star India. “This can drive innovation and quality in content."

The deal, brewing for the last seven-eight months, will amplify Endemol’s ambition. The company has already grown into a ₹ 120 crore firm in the last seven years of its launch. “It was a difficult decision but it will take us to the next level. Content explosion is happening and it will help bring key players under us," Dhar said.

Together with venture fund Zodius, CA Media has also invested in OML (Only Much Louder), a youth music and marketing company that began its journey as an artiste management firm 10 years ago. Today, OML owns and operates a clutch of music festivals and events including Nh7 and Invasion.

“The company has a good, youth-centred business model. It has ambition but it needs scale, where we come in," said Kamat.

The music properties, which broke even within two years of their launch, are scalable and will also move into television with the help of CA Media.

Kamat, who was the managing director of Endemol India before being picked by Viacom18 to head its Hindi entertainment channel Colors and later joining CA Media, said Chernin’s Asia firm was not a typical fund.

“We are not a pure investment fund. We follow a hybrid model—as an operating company and a fund. So we invest as well as build companies. Eventually, we will have a portfolio of companies we are invested in or ones we would be building. We will also invest in our own start- ups much unlike other funds," he said. “Announcements of start-ups are coming soon."

A partner at another miscellaneous fund, who did not want to be identified, said that CA Media is investing in Endemol India as the latter’s parent company is under financial stress with reports of significant debt on its balance sheet.

But Just Spee, the newly appointed chief executive of Endemol LV, denied this. “The assumption that we agreed to partner CA because of the financial ill health of the company is incorrect. That was not the driver," Spee said over the phone. “Why we agreed to partner CA Media India was because it will help us rapidly grow in the country. We will not just use the money but its expertise," Spee said.

India is a very important market for Endemol even though it contributes less than 5% to its revenue, Spee said. “It is growing."

According to Spee, the financial health of the company was a concern earlier. “Now with the financial restructure almost complete, Endemol is in good shape," said Spee, who joined Endemol as chief financial officer in 2010 and took over as the company’s CEO earlier this month.

Spee did not confirm the size of the deal either. “CA Media has asked us not to talk numbers," he said.

Will Endemol dilute equity in its subsidiaries in other markets? “Diluting is a negative word. It is a partnership with CA Media. Such partnership are opportunity-driven. It does not mean that we will not partner companies in other markets," he said.

Spee agreed that the investment from CA Media will be used for diversifying the content business. “We are already in films in other markets, in the US and in Netherlands. We are in digital content too. We are diversifying in India now," he said.

shuchi.b@livemint.com

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