The Securities and Exchange Board of India has approved The Walt Disney Company's deal to increase stake in Ronnie Screwvala-promoted UTV Software Communications beyond 15 per cent, six months after the deal was initially signed. Sebi, the market regulator, has also okayed the US-based company to launch an open offer.
According to a senior executive from Goldman Sachs, advisors to The Walt Disney Company, the market watchdog has approved the transaction last week. "We will send a notice to shareholders in the next 10-12 days and are expecting to give the mandatory advertisement for the open offer some time this week," he said.
Under the agreement that was signed on February 18, The Walt Disney Company, which holds 14.85 per cent stake in the company, will subscribe to 93,52,500 equity shares at a price of Rs 860.79 a share to increase its stake to 32.1 per cent. The total investment by Disney in the company will amount to about Rs 805 crore (Rs 8.05 billion).
In addition, the company will issue 45,32,000 warrants convertible into 45,32,000 shares to Unilazer Exports and Management Consultants, one of the promoters of UTV Software at a price of Rs 860.79 a warrant, aggregating to Rs 390 crore (Rs 3.9 billion).
Under the agreement, Screwvala will have the first right of refusal to buy out shares tendered under the open offer for the next four years at Rs 860.79, sources said. In case the Indian promoters do not exercise the right, The Walt Disney Company's sake would rise above 51 per cent at the end of four years, sources said.
The agreement permits the Indian promoters and Disney to appoint three directors each on the 12- member board of directors of UTV Software. Screwvala will be chairman and managing director of the company for two successive terms of five years each.
In addition, Disney has invested Rs 119 crore (Rs 1.19 billion) in UTV Global Broadcasting, a subsidiary of UTV Software, for a 15 per cent stake and 7,20,000 warrants. UGBL has the option to convert the warrants into equity, taking Disney's holding to 37.5 per cent in the subsidiary.