The Mumbai bench of the National Company Law Tribunal has admitted the merger scheme between Reliance Industries Ltd’s Viacom18, its wholly-owned subsidiary Digital18 and Walt Disney’s Star India, marking the first step towards completion of the mega-merger deal.
In an order passed on May 7, a division bench of judicial member Kishore Vemulapalli and technical member Anu Jagmohan Singh directed the companies to convene a meeting of their secured and unsecured creditors to get approval for the merger scheme.
The tribunal has appointed retired Justice Suresh Chandrakant Gupte as chairperson for the meetings of secured and unsecured creditors of Viacom18 and unsecured creditors of Star India.
In the absence of Justice Gupte as chairperson, Naina Krishna Murthy, partner at Krishnamurthy & Co, will assume the role.
B Narsimhan, proprietor of BN Associates, has been appointed as scrutiniser for the meetings of creditors of the two companies. If Narsimhan is unable to serve as the scrutiniser, Venkataraman K will be appointed in his place.
It has also directed the companies to serve notices along with a copy of the merger scheme to the central government through the offices of the regional director (western region), Mumbai, the Registrar of Companies, the income tax authority, the goods & services tax authorities, the Competition Commission of India (CCI), the ministry of corporate affairs and other sectoral and regulatory authorities.
The bench stated that if authorities don’t respond to notices within 30 days, it will be assumed that they don’t have any objections to the proposed scheme.
The merger scheme has two stages: the transfer of Viacom18’s TV and streaming assets to Digital18 and the demerger and vesting of these assets from Digital18 to Star India.
As consideration for the scheme, Viacom18 will transfer streaming platform JioCinema to Digital18, which will pay the company a consideration of Rs 24,186 crore through an allotment of 24.18 billion fully paid-up shares of Rs 10 each.
Viacom18 will also transfer its media operations to Digital18 for a consideration of Rs 2,769 crore in the form of an allotment of 2.76 billion fully paid-up shares of Rs 10 each.
Digital18 will then transfer Viacom18 assets to Star India, which will allot proportionate shares among all Digital18 shareholders. Star will also allot shares to RIL for its fund infusion of $1.4 billion.
Star India’s shareholding will be divided among Walt Disney (36.63%), Digital18 (46.11%) and RIL (16.34%) after the allotment of shares to Digital18 and RIL.
In a separate order dated May 15, the NCLT Mumbai bench has approved the amalgamation of Novi Digital Entertainment, the owner of Disney+ Hotstar, with its parent company, Star India.
It is pertinent to note that Viacom18 has two shareholders—RIL and its group entities and Bodhi Tree Systems, promoted by James Murdoch and Uday Shankar. Paramount Global has decided to exit Viacom18 by selling its 13% stake to RIL for Rs 4,286 crore.
The application was filed by the companies on March 29, a month after the announcement of the mega merger deal that will lead to the creation of a $8.5 billion media behemoth with leadership positions in both linear TV and video streaming segments.
The applicant companies are required to provide information on their corporate guarantee, performance guarantee, contingent liabilities and whether they have any pending IBC cases, along with details of litigation, letters of credit and margin money details.
Ashish K Singh, managing partner of law firm Capstone Legal, said the order is an important procedural step towards the merger. In addition to calling a meeting of creditors and members of both companies, NCLT has directed that tax authorities may also be informed about the proposed merger. This step is likely to take around 30 days.
“In addition to conducting the meeting, both entities are required to submit a list of any litigation related to IBC before the NCLT. This exercise is undertaken for the greater interest of shareholders,” said Singh..
The Star-Viacom18 combined will have over 100 TV channels and two streaming platforms—Disney+ Hotstar and JioCinema. The entity will have over 750 million viewers across India and will also cater to the Indian diaspora across the world.
