Disney ups stake in India's UTV

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NEW DELHI -- In one of the largest-ever foreign investments in the Indian media and entertainment industry, the Walt Disney Co. is pumping around $330 million into Mumbai-based diversified media group UTV.

UTV chairman Ronnie Screwvala said Monday that UTV Motion Pictures "will be the largest movie studio from India and South Asia." The company has 12-18 movies slated this year, including a co-production with 20th Century Fox of M. Night Shyamalan's thriller "The Happening."

"This investment underlines our confidence in Ronnie's team and the Indian entertainment industry," Walt Disney International chairman Andy Bird said. "The relationship with UTV "will further complement Disney's existing ventures here including the Disney Channel (run by Mumbai-based subsidiary Walt Disney Company India) and Hungama, in addition to our recent expansions in Disney merchandised products," he added.

The Walt Disney Co. (Southeast Asia) will increase its existing 14.9% stake in holding company UTV Software Communications to 32.1%, with an investment of about 8.05 billion rupees ($203 million). This will be done via a preferential allotment of 9,352,500 shares at a price of about $22 per share.

Disney also will acquire a 15% stake in UTV's recently launched UTV Global Broadcasting Ltd. for $30 million.

UTV's Screwvala and his group will consolidate their stake at 32.1% in UTVSC from their previous share of 30.67% after being issued 4.5 million warrants convertible into shares at about $22 per warrant) for $100 million. This brings Disney's total investments to about $330 million, which will be presented for shareholder approval at UTV's special general meeting on March 17.

In July 2006, Disney acquired UTV's kids channel Hungama TV for $30.5 million while taking a 14.9% equity in UTVSC for $14 million.

UTVSC owns 77% of UTV Motion Pictures, which raised $70 million last July when it listed on the London Stock Exchange's Alternative Investment Market.

UTV's present management "continues as before with its board now expanded to 12 members including three representatives each from UTV and Disney with six remaining independent members. The next level of shareholding will be re-examined after four years," Screwvala said.

"If some shareholders tender their shares, then Ronnie (Screwvala and fellow promoters) reserves the right to buy back the extra shares at the open offer price from Disney (to limit Disney's stake to 32.1%)," UTV group chief financial officer Roma Patel said. Under the terms of the deal, the U.S. company cannot increase its stake above 32.1% for the next four years.

Last June, Disney forayed into Indian film production with an equal joint venture announced with Mumbai-based banner Yash Raj Films with which it is co-producing animation feature "Roadside Romeo," slated for release later this year.

Bird clarified that the deal with Yash Raj is "exclusively for animation features. We are looking at movies being developed at UTV which provide Disney an opportunity to participate in this fast growing business."

Disney's move is the latest investment by a foreign major. Recent investment announcements include NBC Universal acquiring a 26% stake in New Delhi Television for $150 million, and Turner Broadcasting's $21.25 million investment in a joint venture with New Delhi-based Miditech.

These developments "reflect the opportunities available here and indicate to a consolidation in the business," Mumbai-based PricewaterhouseCoopers entertainment and media practice leader Timmy Kandhari said. "Indian players face a challenging time with the increased investments announced by the global majors because broadcasting requires very deep pockets."
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