Walt Disney Company

 Largest media conglomerate in the world in terms of revenue.

 Best known for the products of its film studio, the Walt Disney Studios, and today one of the largest
and best-known studios in Hollywood
 Disney also owns and operates the ABC broadcast television network; cable television networks such
as Disney Channel, ESPN, A+E Networks, and ABC Family; publishing, merchandising, and theatre
divisions
 Owns and licenses 14 theme parks around the world.
 It also has a successful music division.
 The company has been a component of the Dow Jones Industrial Average since May 6, 1991.
 An early and well-known cartoon creation of the company, Mickey Mouse, is the official mascot of
The Walt Disney Company.

UTV Software Communications

 An Indian media and entertainment company

 Started off as United Software Communications Pvt. Ltd on 22 June 1990
 Headed by Ronnie Screwvala
 The Group has a Vertical Ownership Pattern.
 These 5 verticals include the following:
 Television Content
 Motion Pictures
 Games Content
 Broadcasting
 Interactive
 Great year for TV, media and Music Industry
 Government Regulations and Policies
 Animations and Gaming growth
 Broadcasters expanding their footprints
 Digitization process initiated
 Entertainment/Media profiles recorded maximum rise in job opportunities
 Consumer Empowerment
 Increased Competition because of advancement in Technology
 Cable
 DTH
 Content Producers
 More than 8,000 of India’s 11,000 (approx) theatre screens are owned by individuals which makes it
impossible to have a “national” release for any of the 1,000s films produced in an year
 Most of the large companies are within Rs 1,000 crore as investment has funded organic growth.
 In broadcasting, valuations have remained a arguable point because the industry structure makes it
difficult to predict revenues.
 In cable, according to an estimate, more than half the networks are owned by local politicians which
leaves very little to acquire.
 There has been very little merger and acquisition (M&A) activity in this industry so far.
 The Cable Television Network (Regulation) Amendment Act could help subscriptions finally become a
good source of revenues for media companies, reducing their dependence on advertising.
 Today, a viewer pays as little as 50 paise to watch an hour of TV. Even this revenue does not reach the
channels completely because of under-reporting by local cable operators.
  India's entertainment and media industry is estimated to grow at a compounded annual rate of 13%
to Rs 1,19,890 crore in 2015 from Rs 64,600 crore in 2010
 The overall multiples for media companies had been low for a while but these developments in
broadcasting policies has attracted investors like Disney.
 The acquisition was in line with their growth strategy.
 They wanted to increase their international presence .
 They wanted to effectively capture the market of world’s second largest population.
 Disney would become one of the leading broadcasters reaching more than 100 million viewers weekly
in households across India.
 Disney would become India’s leading film studio and would produce both UTV and Disney-branded
local films.
 According to KPMG, the overall multiples were all time low for the media companies.
 Disney offered an exit price of Rs. 1000 or below valuing the deal to be around Rs. 2000 crore.
 CCI approved the merger as it did not have any adverse effect on the competition.
 The floor price as determined by the Lead manager( Morgan Stanley) was Rs 835.03 a share.
 The shares were trading above the floor price determined.
 The shareholders as well as the promoters could expect a lucrative exit price from Walt Disney.
 The acquirer would have easily been asked to pay 10 % premium.
 Also, Ronnie Screwvala was offered to be the Managing Director of Walt Disney India.
 The promoters Rohinton Screwvala, Zarina Mehta and Unilazer also found the offer lucrative.
 The merger was a win-win situation for both the firms.
 When discussions with Disney started, it was realised that the deal couldn’t proceed without resolving
the Hungama issue as Disney was in the kids’ space.

- Disney had its own branded kid’s channel.

- Disney sorely needed Hungama as their own channels were not
doing well.

 UTV couldn’t have partnered with them in all areas while competing in one.
 Disney paid $30.5 million for Hungama and also purchased a 14.9 percent stake in UTV for $14
million, giving Screwvala’s listed company a valuation of just under $100 million.
 Screwvala was in for the deal, because he believed it would give UTV cash to fund his itch for constant
expansion.
 His company’s management was less certain, reasons being

-They had certainly sought investments, but Disney had indicated a frighteningly deep involvement.
-The executives wondered if their control would be compromised
One board member said, “We are not putting Hungama up for sale. We were looking at a strategic investor in
UTV with no thought process of exiting Hungama TV. If anybody had come with an outright purchase deal for
the channel, our answer would be a flat ‘no’.

 Some of the businesses considered by the CCI while analysing the effect of the transaction included
the business of:
 Motion pictures in India
 TV broadcasting
 Creation and distribution of content for interactive media such as mobiles and.
 Character merchandising and publishing.
  There is no declaration as such that these businesses would be the relevant market and hence it is not
clear whether it can be considered as a precedent for future transactions.
 The transaction was notified on 24 August 2011 and the clearance decision was issued on 15
September 2011.
 The Acquirers were directed by the CCI on 29 August 2011 to provide additional information and
documents.
 The information was furnished on 5 September 2011 and
 Some additional information was provided on 9 September 2011.

Issues arising from CCI regulations

Cinema Decline across population strata

 Disney already owned 50.44% of UTV

 Offer of $454Mn to acquire the balance stake to gain a controlling interest in the group.
 Privately negotiated share purchase from UTV co-founder and CEO Ronnie Screwvala and his affiliates
(19.82%)
 A delisting offer to the public shareholders (29.74%)

Macro Economic Conditions

The Transaction- Problems and Resistances

The Target audience

M&E Companies

Advantages of Indian Population

References

Type of transaction
Introduction Contd: Competitors
Source: Recreated by authors from data taken from vanita Kohli-Khanderkar, The Indian Media Business

Recomendaciones

The Transaction- Problems and Resistances

Decisiones a tomar

Type of Merger and Macro Environment

Introduction
20% of income spent on leisure and entertainment

 Some of the businesses considered by the CCI while analysing the effect of the transaction included
the business of:

(i) Motion pictures in India

(ii) TV broadcasting
(iii) Creation and distribution of content for interactive media such as mobiles and.
(iv) Character merchandising and publishing.

 There is no declaration as such that these businesses would be the relevant market and hence it is not
clear whether it can be considered as a precedent for future transactions.
 The transaction was notified on 24 August 2011 and the clearance decision was issued on 15
September 2011.

- The Acquirers were directed by the CCI on 29 August 2011 to provide additional information and documents.
- The information was furnished on 5 September 2011 and
- some additional information was provided on 9 September 2011.

Problems faced

Resistance Faced

The Walt Disney- UTV merger

 600 million television viewers, 350 million newspaper readers, 100 million Web surfers .
 Strengths of Indian Media Industry - Volumes, Rich Content and Growing Purchasing Power
 BUT, fragmentation on both the content creation and the content distribution side, makes it difficult
to leverage any of the strengths of the market
 As investment started flowing in, in the mid-nineties, it was hoped that consolidation would lead to
scale and profitability
 In films, even after 10 years of corporatization, there are only three studios worth mentioning: UTV,
Eros and Yash Raj. Together, they released 138 films in 2010 which fetched them 10 per cent of the
total revenues of the industry.

The Deal

Key Financials

Extent of investment, risk & return in different business

Rural Population

 But when discussions with Disney started, it was realised that the deal couldn’t proceed without
resolving the Hungama issue as Disney was in the kids’ space.

-Disney had its own branded kid’s channel.

- Disney sorely needed Hungama as their own channels were not
doing well.

 UTV couldn’t have partnered with them in all areas while competing in one.
 Disney paid $30.5 million for Hungama and also purchased a 14.9 percent stake in UTV for $14
million, giving Screwvala’s listed company a valuation of just under $100 million.

Agenda
Launched in September 2004.

Issues arising from CCI regulations

SWOT Analysis
Urban Population
Industry Conditions-Present Day

1) Introduction

2) Type/Classification of transaction

3) Macro economic conditions existing at the time of the Corporate action

4) Industry conditions specific to the transaction

5) Reasons for the transaction from the perspective of acquirer and target

6) Whether the transaction went through easily or met with resistance?

7) Whether the deal was a success or failure ?

Motion Pictures

Industry Conditions

 http://www.caravanmagazine.in/Story.aspx?StoryID=1429&Page=2
 http://www.deadline.com/2012/01/disney-makes-deal-to-acquire-controlling-interest-in-indias-utv/
 http://www.mayerbrown.com/files/Publication/dd
 http://www.c21media.net/archives/86015

Intro

 El know how para evitar la fuga de capital

 Buscar aliados estrategicos para expandirse en mercados internacionales

Industry Conditions

 Clara

Macro Economic Conditions

 Walt Disney’s extremely process-oriented, bordering-on-the-bureaucratic culture contrasts sharply

with UTV’s we-are-still-in-the-start-up-mode.
 Despite this difference, the merger has been, in our view a successful, albeit a long one
 The CCI found no major issues during the merger and delisting of UTV
 Post delisting, Disney rejigged the assets in India forming DisneyUTV Digital
 Recently in August, Govt gave nod to Disney's Rs 1000 Cr FDI proposal

Industry Conditions
  Great year for TV, media and Music Industry
 Government Regulations and Policies
 Animations and Gaming growth
 Broadcasters expanding their footprints
 Digitization process initiated
 Entertainment/Media profiles recorded maximum rise in job opportunities
 Consumer Empowerment
 Increased Competition because of advancement in Technology
 Cable
 DTH
 Content Producers

Reasons for Walt Disney to acquire

Reasons for UTV to go for it…

The Deal: Success or Failure

Revenues (Rs. million)

 Disney already owned 50.44% of UTV

 Offer of $454Mn to acquire the balance stake to gain a controlling interest in the group.
 Privately negotiated share purchase from UTV co-founder and CEO Ronnie Screwvala and his affiliates
 A delisting offer to the public shareholders

Type of Transaction

Introduction

 Screwvala was in for the deal, because he believed it would give UTV cash to fund his itch for constant
expansion.
 His company’s management was less certain, reasons being

-They had certainly sought investments, but Disney had indicated a frighteningly deep involvement.
-The executives wondered if their control would be compromised
One board member said, “We are not putting Hungama up for sale. We were looking at a strategic investor in
UTV with no thought process of exiting Hungama TV. If anybody had come with an outright purchase deal for
the channel, our answer would be a flat ‘no’.

30 – 40 million people are joining middle class every year.