The RIL-Network18 deal as seen by CCI

The Competition Commission of India (CCI) has relied on the notice given by Independent Media Trust (IMT) and associated entities to put together a sequence of acquisitions that are inter-connected and interdependent on each other. Edited excerpts from CCI order:

• Raghav Bahl and his associates to transfer their entire holding of around 40 per cent in Network18 Media & Investments to six unlisted entities -RB Media Soft, RRB Mediasoft, RB Media Holdings, Adventure Marketing, Watermark Infratech and Colourful Media (target companies).

   

• IMT to subscribe to zero coupon optionally convertible debentures (ZOCDs) of the six entities. The holder of ZOCDs has an option to convert those into equity shares at any time during 10 years. Upon conversion of all ZOCDs into equity shares, IMT would hold 99.9 per cent in each of the six holding companies.

   

 

Acquisition of such a right to convert ZOCDs into equity shares confers on IMT the ability to exercise decisive influence over the management and affairs of each of the target companies, amounting to control.

 

The subscription of ZOCDs, in turn, would also result in indirect acquisition of control over Network18 and TV18, as these companies would be under the control of the target companies.

 

In terms of trust deed of IMT, Reliance Industries Ltd (RIL) is the exclusive beneficiary. Further, Reliance Industrial Investments and Holdings (RIIH), a wholly owned subsidiary of RIL, is designated as the protector in the trust deed.

 

Nilrab Media, owned by Raghav Bahl and his wife, is the trustee, according to the regulatory filings by Network18. But as the protector, RIIH has the power to remove and appoint trustees. RIL, in turn, owns RIIH.

 

Hence, RIL has indirectly acquired control over target companies, which, in turn, results in indirect acquisition of control over Network18 and TV18.