A story on page 9 of ET, headlined “Will the RIL-TV18 deal trigger takeover code?“, says SEBI “may ask for details” about Reliance funding Network18/TV18 to help it purchase RIL’s stake in ETV, “if there’s any change in control” [of ownership of Network18/TV18].
“The deal between Reliance Industries and Network18 Group has put the spotlight on the elusive concept of control as some analysts speculate whether the energy-to-education conglomerate’s investment in the media firm could potentially place RIL in effective charge of the Raghav Bahl controlled entity.”
On paper, Reliance will route its investment in Network18 through “Independent Media Trust”. The trust will subscribe to the optionally convertible debentures (OCDs) issued by the holding company of the Network18 group. This money will then be used by the promoters of Network18/TV18 to invest in the rights issues of its two listed companies, purchase RIL’s stake in ETV and repay debts.
The catch is, Reliance can convert its OCDs into equity as some later stage.
ET quotes a Morgan Stanley report of January 6 that the country’s biggest business house may ultimately end up as the single largest shareholder of Network18 Group’s two listed entities.
“Assuming the debentures are converted and that RIL will be the ultimate beneficiary of the promoter’s part of the rights issues, the RIL trust would be the beneficiary of 44% stake in Network18 and 28.5% stake in TV18,” the Morgan Stanley report said.
The latest issue of Outlook Business too has a story on the RIL-TV18-ETV deal.
Headlined “Networking a way out”, the intro to the piece reads “The absurd valuation that Network18 is paying for buying a piece in Eenadu defies economic rationale.”
The piece quotes Star India CEO Peter Mukherjea, who calls the deal a marriage of convenience between an ugly bride and a physically challenged groom.
“One was deep in debt and needed to get cash into the business quickly, and the other was sitting on an asset they purchased some years ago but were not able to monetise. Structuring the deal this way provides an escape hatch for both. I guess they both will live happily ever after—or will they?”
Infographic: courtesy The Economic Times