Singtel, Warburg Pincus, and Bharti Airtel are in the initial stage of the talks to buy the 61% stake of Zee founder Subhash Chandra’s family in Dish TV, as per an ET Telecom report. Followed by this buyout, the trio will then make an offer for an additional 26% stake in the company as the Sunil Bharti Mittal led telco is in a bid to ramp up its operations in the Digital TV and home broadband sector to better prepare for the launch of Reliance Jio GigaFiber. After the deal goes through, Bharti Airtel’s digital TV business which is the entity – Bharti Telemedia will be combined with the listed company Dish TV through a reverse merger.
Current Stakeholders of Dish TV Looking for Liquidity
If this merger goes through, then it will be a win-win situation since the Zee Group promoters are in search for liquidity and have pledged 82.05% of their holding Dish TV and 59% stake in Zee entertainment to their lenders. The total debt for Essel Group stands at Rs 17,174 crore including the debts of unlisted private companies and listed companies as well. Also, Zee founder Subhash Chandra is looking to sell a substantial stake in Zee entertainment.
One of the people aware of the matter said, “The negotiations (for Dish TV) are around the valuations, with an expected offer at over Rs 50 a share for the promoter stake.” He also said that the due diligence is on and the deal should be complete in two months. With the share price being Rs 50 per share and speaking of an 87% stake, the total payout could be around $1.15 billion or around Rs 8,000 crore.
The trio of Bharti Airtel, Warburg Pincus and Singtel will also have to take over the debt of the digital TV giant. By March 31, 2018, the liabilities stood at Rs 3,154 crore (around $451 million), however, as per the estimates made by SBICap Securities, the debt might have increased to $600 million by December end.
Consortium Will Have to Reduce Stake From 75% Post Merger
It is quite notable that once this merger goes through the total stakeholding of the consortium of companies will be more than the maximum permissible limit of 75% in a listed company. After that, the consortium will have a period of one year to reduce this stake to the allowable limit.
As per the people aware of the matter, since Bharti Airtel’s balance sheet is still laden with debt, Warburg Pincus and Singtel are likely to do the heavy investing. But even then, Bharti Airtel will end up with a sizeable holding in the merged entity because of its 80% stake in Bharti Telemedia, in which Warburg Pincus holds the rest 20% stake. Also, this merger would be Airtel’s move after Reliance Jio did a display of power by acquiring a majority stake in Hathway Cable and Datacom and DEN Networks. Both the telecom operators are looking to gain customers by attacking three fronts of mobile networks, TV distribution and home broadband.
If and when the merger happens, the combined entity will be the biggest TV distribution company in the world with 38 million subscribers and a 61% share of India’s DTH market. Reliance Jio, on the other hand, has control over 24 million cable connected homes after its latest M&A deal.
According to the analysts, since Bharti Airtel’s DTH wing is more clustered in urban cities, it is prone to the attack of Reliance Jio GigaFiber as the company is expected to target 80-100 top tier I and tier II towns when it launches.