After almost 12 years, Rupert Murdoch’s News Corporation, which runs STAR India, has sold its entire 17.3 per cent stake in cable distribution company Hathway Cable & Datacom Ltd to Providence Equity Advisors, a US-based private equity major, and Sydney-headquartered Macquarie Bank for Rs 358 crore.
The shares were bought from a News Corp subsidiary, Asian Cable Systems, in a series of bulk deals at Rs 145 a share on Monday. Around 24.7 million shares of Hathway were sold in the market transaction. Macquarie purchased 10.5 million shares for about Rs 153 crore and the rest was acquired by Providence for about Rs 205 crore.
The media conglomerate had acquired 26 per cent stake in Hathway in 2000. The reasons for News Corp offloading its holding could not be ascertained immediately. Hathway’s shares closed at Rs 179. 55, up 1.3 per cent on the Bombay Stock Exchange after touching an intra-day high of Rs 185.25. The market capitalisation is Rs 2,564 crore.
As on December 2011 , the Indian and foreign promoters, Akshay Raheja, Viren Raheja, Hathway Investments and Spur Cable & Datacom, owned 49.47 per cent in the company. Asian Cable Systems held 17.3 per cent. Foreign institutional investors, mutual funds and other entities owned 19.76 per cent and the balance by public and other non-institutional investors.
Providence manages funds of $23 billion globally.
In India, it has investments in Idea Cellular and UFO Moviez India. Providence had bought 15 per cent in Idea Cellular in 2006 for around Rs 1,800 crore, through its investment arm, P5 Asia Investment (Mauritius). As on December 2011, it had 9.98 per cent stake in Idea. In April 2011, Providence invested around Rs 260 crore in a mix of primary and secondary investments in UFO Moviez.
The year 2011 witnessed 10 deals worth Rs 843 crore in media & entertainment in India against 12 deals worth Rs 500 crore in 2010, according to data from VCCedge. Major deals in 2011 include a Rs 300-crore investment in Avitel Post Studioz by HSBC, a Rs 260-crore investment in UFO Moviez by Providence Equity Partners and a Rs 194-crore deal by SIDOFI Communications Investments in Asianet News Network.
Dinyar Contractor, editor, Satellite & Cable TV magazine, expects more merger and acquisition activity among cable companies. “Digital delivery is poised for a spurt in growth, being more cost-efficient than analogue systems,” he said. The proposed acquisition comes in the wake of the Lok Sabha passing the Cable Television Networks (Regul-ation) Amendment Bill, 2011, which makes it compulsory for cable companies to convert their analogue systems to digital in a phased manner from June 2012.
A 2011 report by the Federation of Indian Chambers of Commerce and Industry (Ficci) and advisory firm KPMG said cable and satellite (C&S) households increased to 78 per cent of all television households in 2010 from 74 per cent in 2009. The overall number of C&S households reached 108 million in 2010. The cable business is estimated to be in the region of Rs 20,000 crore.
Multi system operators or MSOs (large cable networks) such as Hathway and IndusInd Media are currently allowed to have up to 49 per cent foreign investment. Although the Telecom Regulatory Authority of India has recommended a 74 per cent foreign direct investment limit for MSOs, this is yet to be notified by the government.