The Competition Commission of India (CCI) has approved the merger between Reliance Industries-promoted Viacom18 and Walt Disney-owned Star India three months after they filed for it, paving the way for the creation of the country’s largest media and entertainment firm.
The watchdog on Wednesday said the approval is subject to compliance with voluntary modifications to the merger scheme. A CCI order detailing these modifications will be released soon.
ET was the first to report on August 2 that the two conglomerates are confident of closing the merger deal by October.
The voluntary modifications may set the stage for ongoing oversight to ensure the new entity does not engage in monopolistic practices, particularly in sports broadcasting and content licensing, said Nilesh Tribhuvann, managing partner, White & Brief Advocates & Solicitors.
With CCI approval in place and the National Company Law Tribunal (NCLT) posting the merger scheme for final hearing, integration between the two companies will begin soon.
Elara Capital senior vice-president Karan Taurani said the competition regulator’s approval is the biggest hurdle to be crossed in such large deals. “With the CCI approval in place, others (from) NCLT, ministry of information & broadcasting, etc, will not be that time-consuming,” he said.
RIL will control the merged entity, with a 56% stake. Disney will own 37% of the combined firm, while Bodhi Tree Systems will have the remaining 7% stake.
The merged entity will have a valuation of Rs 70,352 crore and a dominant presence in both TV and streaming.
Media Partners Asia vice-president Mihir Shah said the formidable entity will capitalise “on scale and synergies in TV and streaming, with ambitions to redefine the media market landscape and compete more effectively with global digital juggernauts.”
Star India has been valued at Rs 26,000 crore while Viacom18’s valuation is Rs 33,000 crore. Disney+ Hotstar and JioCinema have been valued more than the linear TV businesses of Star and Viacom18, respectively.
RIL will infuse Rs 11,500 crore in the merged entity. With this, Ambani’s group will have ploughed more than Rs 22,000 crore into the media and entertainment business. In April 2023, RIL injected Rs 10,839 crore into Viacom18 as part of a Rs 15,145-crore infusion, which also saw Uday Shankar and James Murdoch’s Bodhi Tree Systems invest Rs 4,306 crore.
“Under a new market framework, the industry must tackle past challenges, including the under-indexing of advertising spend relative to GDP and escalating content costs in streaming,” said Shah, adding that strategic investments in talent development and technological advancements will be crucial for future growth.
The merger will also mark the exit of Paramount Global, which has sold its 13% in Viacom18 to RIL for Rs 4,286 crore.
Nita Ambani and Uday Shankar will be the chairperson and vice chairperson, respectively, of the merged entity. Disney Star head K Madhavan is likely to exit, according to people with knowledge of the matter.
As reported earlier by ET, Star and Viacom18 had offered to shut some second-rung entertainment channels across languages in markets where there is an overlap. ET reported that Disney+ Hotstar may get absorbed into JioCinema to create India’s preeminent streaming platform. Another alternative proposed by Reliance and Disney was to freeze ad rates for two years, specifically on cricket rights.
Milestone merger
The merger approval is historic from an industry and consolidation standpoint, said TMT Law Practice founding partner Abhishek Malhotra. “From the lens of competition law, this demonstrates the approach of laissez faire, that is, to grant the merger approval and let the merged entity play out in the arena and demonstrate its commitment to upholding competition, by making voluntary concessions and commitments,” he said. “Of course, CCI remains vigilant to address any specific information/complaint of anti-competitive behaviour in future.”
“Overall, this merger represents a significant transformation in India’s media landscape, creating opportunities and challenges for industry players, reshaping the competitive environment, and having far-reaching implications for content production, advertising, and consumer choice,” said Tribhuvann of White & Brief.
Sudip Mahapatra, partner at law firm S&R Associates, said, “These measures were voluntarily proposed by the parties, presumably to address the concerns raised by CCI. The parties can go ahead with the transaction by implementing these measures. Given that the parties themselves proposed these measures, they should be able to implement them without significant challenges.”
“Remedies and timelines offered by the parties to CCI would entail starting the procedural steps for the merger and putting in place a postclosing monitoring mechanism to ensure (continued) compliance…,” said Shafaq Uraizee Sapre, Mumbai managing partner of law firm Chandhiok & Mahajan.
