Proceeds from stake sale to be used for debt reduction, says Reliance Capital
Anil Ambani-led Reliance Capital has agreed to sell 49% stake in its radio broadcast business and 100% stake in its general entertainment TV business for value of Rs. 1900 crore to Subash Chandra-led Zee Group as part of its stated strategy to reduce leverage and exposure in non-core business of media and entertainment.
Reliance Broadcast Network Limited (RBNL), the largest operator of FM channels in India, has signed definitive and binding agreements with Zee Media Corporation Limited (ZMCL) to sell 49% stake in its radio broadcast business said a Reliance Capital statement. It added that Zee Entertainment Enterprises Ltd (ZEEL), a separate entity under Zee Group, will acquire 100% stake in the Group’s General Entertainment TV business.
“We are happy to bring in Zee Media as our partner in the Radio business and divest 100 per cent of our general entertainment TV business to Zee Entertainment. This transaction is part of our strategy to reduce exposure in non-core business of media and entertainment and work towards further reducing our debt under Reliance Capital”, said Mr. Sam Ghosh, ED and Group CEO, Reliance Capital.
Money to be used for debt reduction
The entire proceeds from the stake sale would be used to reduce Reliance Capital’s debt by approx. Rs. 1,900 crore upon the completion of sale transactions. Both these transactions have been approved by the boards of respective companies and are expected to be completed by next year, subject to applicable approvals.
“We are pleased to announce this partnership which shall not only be complementary to our current business but accelerate its growth too. We are currently running successfully a bouquet of 11 news and current affair channels and with the addition of 59 radio licenses, we will be reaching out to a much increased audience base and will keep them engaged on different media platforms,” said Mr. Rajiv Singh, COO, Zee Media Corporation adding that this transaction would bring about the desired business diversity and will help in achieving the sound financial objectives at an accelerated pace.
RBNL runs the largest network of FM Radio channels in India under the brand name of 92.7 Big FM that reaches out to 45 cities, 1200 towns and over 200 million people.
The company shall be transferring the 45 operational and 14 new channels into two SPVs respectively and ZMCL shall acquire 49 per cent stake in each of these two SPVs. Both companies shall also have a call/put option for the balance 51 per cent stake in both the SPVs after the stipulated lock-in period.
“We are pleased to announce this acquisition which further adds to our expanding universe of general entertainment channels. Big Magic gives us access to comedy genre enhancing our customer offerings. BigGanga, a leading Bhojpuri channel syncs with our strategy of expanding into the regional markets which offers attractive growth potential,” said Mr. Punit Goenka, MD, Zee Entertainment Enterprise Limited.
EY was the financial advisor to RBNL for these transactions. Paras Bothra President Equities at Ashika stock broking believes that any debt reduction exercise is good for the stakeholders. “These transactions will help the management to focus on the core financial services business,” he said.