Zee, Star Set To Merge

The merger of the Indian media interests of Rupert Murdoch and Subhash Chandra is set to create a media behemoth in Zee Telefilms Ltd. The deal is likely to be signed tomorrow in London.

Apart from the three Star India channels _ Star News, Star Plus and Star Movies _ Asia Today Ltd (ATL), the 50:50 joint venture between Chandra and Murdoch; Siticable, the 50:50 joint venture between Zee Telefilms and Murdoch; and Chandra's Zee Multimedia, which owns the UK, US, African and European Zee channels, will be merged with Zee Telefilms.

The value of ZTL is likely to be around $3 billion, according to a study conducted by investment bank Goldman Sachs, which was hired by Star TV for the deal.

 

Neither Subhash Chandra nor Zee TV CEO Vijay Jindal could be contacted as both were away in London.

The new conglomerate will own at least seven channels in India, software production capabilities, advertising and marketing arms as well as a cable distribution network in major Indian cities (through Siticable) and Zee channels in the UK, US, Africa and Europe (through Zee Multimedia).

According to sources, both Subhash Chandra and Rupert Murdoch will have an equal stake in the merged company. However, it is understood that the exact modalities of the promoters' holdings are unlikely to be crystallised until the laws of foreign media ownership are clear in India.

"Murdoch may well have to buy out a part of Chandra's stake in the merged company to be on an equal footing with Chandra," said an analyst.

This is because while Murdoch is bringing three Star channels and his 50 per cent stakes each in Siticable and ATL to the table, Chandra is bringing his 50 per cent ATL stake, 100 per cent Zee Multimedia stake as well as his 60 per cent holding in ZTL, which are likely to have a higher value, say analysts.

According to valuations by investment banks, the businesses to be merged with ZTL are valued at three times the present value of Zee Telefilms itself.

This means that the equity of Zee Telefilms will increase from Rs 18 crore at present to Rs 72 crore after the merger.

After the merger is complete, the promoters plan to list the company on the Nasdaq by floating 10 per cent of the expanded capital on the American bourse.

Vijay Jindal, say Zee sources, will be the chief executive officer of the merged company.

One of the final hitches to the merger was sorted out on Saturday last, when the two operational chiefs of Zee and Star, Jindal and R Basu, respectively, held an hour-long meeting at Jindal's office.

The merger plans will also result in a reoganisation of the channels. The news and current affairs channel is likely to be Star News with Zee India TV (formerly El TV) likely to be scrapped or re-focused, say sources.

The Zee Telefilms stock gained Rs 48 during the day to close at an all-time high of Rs 651 on the Bombay Stock Exchange, on a total turnover of Rs 150 crore. The stock was quoted even higher on the kerb after trading at Rs 650.It also closed at an all-time high of Rs 651.40 on the National Stock Exchange.