Reliance-Disney Merger | Both Firms Sign Non-Binding Agreement For India Operations: Report

Reliance-Disney Merger: The 51:49 stock-and-cash consolidation in favour of Reliance is expected to wrap up by February

Reliance and Disney are likely to inject cash as capital investment, which is expected to be in the range of $1-1.5 billion.

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Walt Disney and Reliance Industries (RIL) have entered a non-binding agreement for their Indian media operations merger on Monday, citing sources the Economic Times (ET) reported. As per the report, the two companies had discussions recently about a possible joint venture (JV) in which RIL would get a majority stake. Consolidation between the two would lead to the creation of one of the country's largest media empires, putting it in contention with players such as Zee Entertainment and Sony and streaming services such as Netflix and Amazon Prime.

The 51:49 stock-and-cash consolidation in favour of Reliance is expected to wrap up by February. Both firms are also likely to inject cash as capital investment, which is expected to be in the range of $1-1.5 billion.

According to the ET report, among those leading the negotiations were Kevin Mayer, a former Disney executive brought back in July by CEO Bob Iger as an advisor and Mukesh Ambani's key advisor, Manoj Modi. After previous stints at Disney, Mayer had been running Candle, a media group co-founded with Blackstone's backing. Both had been working for months to bring the talks to a conclusion.

A valuation exercise will officially begin, and legal advisors will start working on the finer details after last week's signing, as per the report. There is the possibility of a 45-60-day exclusivity period that can be mutually extended. Quoting sources, ET quoted said that plans for a step-down subsidiary of RIL's Viacom18 are being floated to absorb Star India through a stock swap. RIL is likely to pay cash for the majority stake, and both companies are being treated as similar-sized ones. Jio Cinema will also be included in the deal.

The deal could prove advantageous for Disney, whose Hotstar streaming app has been running into losses. In November, Iger said that while Disney's television channels were doing well in India, other parts of the business were accruing losses. The company was "considering options" but would like to stay in India and try to "strengthen our hand, improve the bottom line", he added.