Mukesh Ambani-owned Reliance Industries (RIL) is said to be in talks to acquire Sameer Manchandapromoted multi-system operator (MSO), DEN Networks, two highly placed sources with the direct knowledge of the development told ET.
“The deal is most likely to go through and the valuation DEN is looking at is between `2,000 core and `2,200 crore,“ one of the persons said. MSO is the industry term for a cable company, which signs content and carriage deals with broadcasters and offer the services to local cable operators.
RIL and DEN both declined to comment to ET’s detailed questionnaire, citing it as “market speculation“.
RIL, which has launched 4G services in the country under Reliance Jio brand, has been working on the launch of home broadband and cable TV services for quite some time now. It also has plans to offer quad-play services broadband internet, wireline telephony, cable television and wireless.
However, as the market was undergoing a dynamic shift under the government mandated digitisation programme and RIL was focussing more on the launch of Jio, the cable TV plans were put on hold.
A possible acquisition of DEN Networks will give RIL a direct entry into 13 million households, including over 10.5 million digital subscribers.
“It is known that RIL wants to enter this space. They already have a MSO licence and they have laid extensive amount of fibre cable across the country. It is just a matter of time for the company to make some splashy acquisition and hit the ground running,“ a media analyst with a top brokerage firm said.
In 2015, RIL’s step-down subsidiary Reliance Jio Media procured a pan-India MSO licence from the Information & Broadcasting ministry. The same year, RIL hired K Jayaraman, a cable industry expert who led India’s largest MSO Hathway Cable & Datacom, and SN Shar ma, then CEO of DEN Networks, to built its cable business.
While Jayraman continues to be with Reliance Jio, Sharma moved back to DEN Networks as CEO last year.
Incidentally, DEN has called for an AGM on Wednesday, but the person said it is unlikely to announce the deal so soon.
“Talks are at an advanced level but it may not be announced at this AGM,“ he added.
It is pertinent to note that this is not the first time that talks of DEN’s acquisition have surfaced. Last year, ET reported that DEN was in talks with Subhash Chandra-promoted Essel Group’s MSO Siti Cable for a possible merger.
However, the talks failed to take off.The second largest MSO in terms of subscribers, DEN’s cable service is present in over 400 towns across 13 states. It is one of the dominant players in Delhi and Uttar Pradesh. It also has presence in Rajasthan, Haryana, Gujarat, Maharashtra, Karnataka, Madhya Pradesh, Uttarakhand and Kerala.
As of Tuesday, DEN has a market cap of `1,703 crore with 36.78% promoter holding. In 2013, US investment firm Goldman Sachs first picked up 17.8 percent stake in DEN for `689 crore ($110 million), at `217.50 per share. Last year, on September 20, Goldman Sachs again bought a 6.7% for `142.43 crore at a much lower price of `90 per share.
Promoters and Goldman Sachs together hold about 61.28% stake in the company. Another source close to the situation said that RIL might acquire Goldman Sach’s shares as well, giving the PE fund an exit. This, however, could not be independently confirmed till the filing of this report.
DEN’s net debt (as of June 30, 2017) is at `134 crore. Shares of the company closed at `87 apiece on BSE on Tuesday, up 2.65% from previous close.
Source: Economic Times