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

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Sohini Mitter

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Sohini Mitter

23 reads

The rumoured merger between Disney Star and Viacom18 breaches certain thresholds in India’s Competition Act, 2002, and could take over two years to materialise, if at all. Though beneficial for both parties, it could ruffle the feathers of many other stakeholders.

November 15, 2023

8 MINS READ

Key Takeaways

  • The potential merger between Disney's India business and Viacom18 could birth a Rs 25,000-crore media and entertainment giant, thereby violating sections of the Competition Act.
  • Media law experts say the combined entity would be larger than the permissible limit for total turnover, and would have to be scaled down by the anti-trust regulator.
  • Sources close to the matter tell The CapTable that both parties are far from signing on the dotted line, and it could take over 2 years for things to fall into place.
  • While the M&A is good news for the parties involved, it is likely to invite the wrath of cable and DTH operators.

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.”

THE UPSHOT

Section 5 of the Competition Act, 2002, includes thresholds based on the value of assets and turnover of the parties in a merger. The threshold also takes into account the geographical limits of their business operations.

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.

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