Sebi clears TV18, Network 18 rights issues

Paves way for the completion of RIL-TV18- Eenadu deal

The Securities and Exchange Board of India (Sebi) has issued its observations on the twin-rights issues of TV 18 Broadcast and Network 18 paving way for one of the largest media deals inked earlier this year to be executed.

Sebi in its weekly disclosure of processing status of offer documents said, it has issued observations to rights issue documents of both companies on August 17. Both companies had filed offer documents in March.
 
The rights issues, which plan to raise over Rs 5,000 crore between them, will be key to the funding of the acquisition of key channels of Andhra-based Eenadu network and paying of the group's debt.

In a three way deal announced in January, Independent media trust, a trust whose beneficiary is Reliance Industries, will fund promoters of Network 18 and TV 18 subscribe to rights issues. The companies will in turn use the proceeds of the rights issues to complete the acquisition of ETV.

Of the Rs 2,700 crore raised through the rights issue, Network 18 will use Rs 1,384 crore to subscribe to the rights issue of  TV 18 Broadcast so as to keep its stake above 50 per cent. Of the remaining, it will use Rs 1,182 crore to repay loans. On the other hand, TV18 will use Rs 1,925 crore to complete the ETV acquisition. It will use Rs 421 crore to repay loans in its books, the companies said in their offer documents.

TV 18 will buy out a firm called Equator, which in turn owns a firm called Panorama, which controls ETV’s News Channels business. Equator also has 50 per cent in Prism, the company that owns ETV’s entertainment channels and 24.5 per cent in the third entity Eenadu, which owns the Telugu news channels.

“TV18 proposes to undertake the ETV Acquisition which will be entirely funded from the proceeds of the Rights Issue of TV18. In connection with ETV Acquisition, we (Network 18)  and TV18 have entered into a share purchase agreement with Equator, Altitude and Kavindra,” Network 18 said in its offer document. 

Altitude and Kavindra, which together own Equator, will sell their holdings to TV18, for an aggregate consideration of Rs 1,925 crore, the offer document said.

Explaining the structure of the three way deal, the offer document said, IMT will subscribe to Zero coupon optionally convertible debentures (ZOCDs) issued by the promoter entities. The money raised so will in turn be used to subscribe to respective entitlements in the rights issues and any shortfall thereof. The investment agreements for issue of these bonds these were signed on February 27.

“In terms of the ZOCD Investment Agreement, IMT shall subscribe to such number of ZOCDs of face value Rs  100 each,” the offer document.  The ZOCDs will have a tenure of 10 years. 

The offer document  also hinted that the TV18 group may not continue using the trademark of  ETV.  “We may not be able to continue to use ETV trademark and ETV brand names. Pursuant to the Trademark License Agreement, Eenadu has granted an irrevocable, exclusive and royalty free license on a worldwide basis to use the ETV trademarks and ETV brand names in relation to the ETV News Channels and ETV Non-Telugu Channels respectively upto February 28, 2015.