The Board of Control for Cricket in India (BCCI) has stumped the promoters and investors of Nimbus Communications, who had put the company on the block.
According to sources familiar with the developments, the company had actually formalised the sale process by appointing two investment banks, Barclays Capital and Avendus, to help in the sell-off.
But BCCI’s decision to cancel Nimbus’s broadcasting contract and the ongoing legal battle between the two will now delay the sale. It has also put paid to the promoters’ hopes of a valuation of around Rs 2,500 crore ($400-500 million), a significant premium to its current financials.
|QUEERING THE PITCH|
|* Nimbus Communications puts its channels on the block|
|* Appoints Barclays Capital and Avendus as advisors|
|* Initial valuations: Rs 2,080-2,580 cr ($400-500 million)|
|* Early discussions with Sony|
|* BCCI cancels Nimbus contract after payment default|
|* TheOneAlliance terminates distribution contract with Neo Sports and Neo Cricket|
The company owns two sports channels, Neo Cricket and Neo Sports, a sports marketing agency, Nimbus
Sports, and a website, cricketnirvana.com. It was unclear if Nimbus would retain its fledgling marketing agency and the website.
The sale exercise was flagged off after several failed attempts to raise money from the stock markets through an IPO.
When contacted, the Nimbus spokesperson did not want to comment on the proposed sell-off plans. Anil Ahuja, Asia Head of 3i (the single largest shareholder in Nimbus), also did not want to comment.
Sources said the company and its bankers had sounded out a few rival broadcasters and funds, including Multi Screen Media (MSM ), which owns Sony and Set Max, the rights holder for the IPL. They said even Reliance and Network18 could be approached soon. All options — of a full exit or even a majority control — are being explored.
According to the red herring prospectus filed by the company in 2010, promoters Harish Thawani and family owned a little over 30 per cent of the company. Private equity firm 3i is the single largest shareholder in Nimbus, with 30.17 per cent stake.
The fund had invested a total of Rs 350 crore in multiple tranches. Other investors include the Oman Investment Fund, the sovereign wealth fund of Oman, which owns 28.6 per cent through its investment arm, Funderburk Enterprises. The fund is estimated to have pumped in over Rs 400 crore since 2007. Other high-profile investors include Cisco’s investment arm CSI and Americorp Ventures.
In December, right after the sell-off process was initiated, BCCI decided to call off its broadcasting contract with Nimbus for international cricketing matches in India after the latter defaulted on payments to the tune of Rs 80-100 crore. The matter is currently in Bombay High Court, after banks did not allow BCCI to encash the guarantees provided by the broadcaster, citing contractual violations.
Nimbus has been BCCI's local broadcasting partner since it first signed a four-year deal in 2005-06 and renewed the contract in 2009-10 by paying an additional Rs 2,000 crore after being offered the first right of refusal.
Thawani’s initial bid of Rs 2,700 crore for the BCCI contract had set the benchmark and cricket valuations went through the roof since 2005-06. ESPN-Star paid Rs 4,600 crore for all International Cricket Council matches from 2007-2015. MSM paid Rs 8,200 crore for rights to the IPL for nine years in 2009. However, with Nimbus's main sources of revenue under a cloud, the valuations of the deal and the prospects of finding multiple suitors have become extremely challenging, say sources associated with the negotiations.
“But, the process is on. We are waiting to see how everything pans out before a final call is taken. The final valuation will depend on a lot of things, including who the final buyer could be, and if he has existing cricket properties,” says a company official on condition of anonymity.
On Tuesday, Nimbus received another blow from TheOneAlliance, the joint venture company between MSM and Discovery. The alliance has terminated its distribution contract for its sports channels Neo Sports and Neo Cricket. As part of the deal, MSM agreed to pay a minimum guarantee of Rs 270 crore net for three-year distribution of the two channels, said an industry official.
The BCCI deal provided the broadcaster 70-80 percent of its advertising revenues.
Nimbus also has rights to televise the much popular UEFA Euro Cup, French Open tennis and Asia Cup. Even in cricket, viewership fatigue has been setting in. In the last two series against England and the West Indies, Neo Cricket had given 40-60 per cent discount on its initial asking rate of Rs 4.5 lakh for a 10-second ad slot, said media buyers.
Since 2005, Nimbus has mostly been in the red. For the year ended March 31, 2010, Nimbus Communications had posted an income of Rs 733 crore from sales and services, while the net loss stood at Rs 142 crore. According to sources, as of March 2011, Nimbus had accumulated losses of Rs 498 crore.