Disney Star-Viacom18 merger: Union of giants isn’t without hurdles

If The Walt Disney Company’s recent earnings call for the fiscal ended Sept. 30, 2023, is anything to go by, the media behemoth wants to “stay” in India—the world’s most populous country, as CEO Bob Iger underscored—but it also wants to “strengthen its hand [and] improve the bottom line”. That India would be on top of Disney analysts’ minds was almost inevitable, given the growing chorus around the company’s future plans here.

Iger made no bones about the fact that even though Disney’s linear TV business (Star India) is doing quite well and “making money” (refer to chart 1), it’s the “other parts of the business that are challenged”. “We are looking… I’ll call it expansively. I know I’ve said this before. It always gets me in trouble. But we’re considering our options there,” Iger stated on the call.

These “expansive” options, as The CapTable reported earlier, include exploring a full sale of Disney’s broadcasting and digital assets in India, a joint venture (JV) with a local player or even a potential equity sale to private equity (PE) funds. Over the last few weeks, however, Disney is said to be tilting towards a deal with local rival Viacom18, which is 74% owned by Reliance Industries. If the transaction were to happen, it would not only be the biggest merger and acquisition (M&A) in India’s media and entertainment landscape but would also birth a Rs 25,000-crore beast (refer to chart 2). 

“The total quantum of this combination breaches the threshold (in terms of revenues) under Section 5 of the Competition Act,” media law expert Abhishek Malhotra (ex-founding partner at TMT Law Practice) tells The CapTable. “Post-merger, both entities would have to define their market and show competition.”

According to Malhotra, the Competition Commission of India (CCI), the country’s antitrust regulator, would likely “reduce the scope of the relevant market” to just Hindi channels or sports channels if the M&A has to go through. “There is bound to be closure of some [similar] channels if a business case has to be made,” he says.