INDIA BUSINESS WORLD - FEBRUARY 16^th - FEBRUARY 29^th - 2008

DISNEY HIKES STAKE IN UTV TO 32%

Walt Disney has reached a deal to more than double its stake in Indian TV and movie content maker UTV, the two firms said, underscoring the US firm’s efforts to expand globally.

Disney will raise its holding in UTV Software Communication to 32.1%, the same level as UTV’s founders, from 14.9%, by acquiring 9.35 million shares for Rs 8.05 billion ($203 million), at Rs 860.79 a share. The sale of shares will be through a preferential allotment, the companies said in a joint statement. UTV’s founders will be allotted 4.5 million convertible warrants at the same price to give them equal stake in the firm, it said. “We are pleased with our initial investment in UTV, which has strong local brands and media properties that provide complementary growth platforms to Disney’s existing branded efforts,” said Walt Disney International chairman Andy Bird.

Disney and UTV founders have made a joint open offer to acquire a further 20% in UTV Software Communications at the same price as per Indian takeover rules. If the offer is successfully completed, Disney’s holding will rise to 51.6% in the fully diluted equity capital of UTV.

However, Disney will not exercise voting rights on the shares acquired in the open offer for four years, capping its effective stake at 32.1%, UTV said in a separate statement. It also said UTV founders had the right to buy any shares Disney would acquire as a result of the open offer in that time.

“There is no high expectation that we will get many shares in the open offer,” UTV CEO Ronnie Screwvala told reporters at a news conference.

News of the Disney investment failed to cheer UTV shares, which fell 4% to Rs 828.25 as investors thought the open price offer was below market expectations. The stock had hit a year high of Rs 1,132 in December. UTV’s board will expand to 12 from 8 after the preferential allotment, and both Disney and UTV’s founders will have three members each, he said. Besides investing in the parent company UTV Software, Mr. Bird is also looking to invest about $30 m for a 15% stake in UTV Broadcasting, UTV's subsidiary.