afaqs!

Post Rs 585 crore Turner deal, NDTV hopes to become debt free

By Sangeeta Tanwar , afaqs!, New Delhi | In Media Publishing | December 09, 2009
New Delhi Television Ltd (NDTV) will sell most of its indirect stake in NDTV Imagine Ltd (Imagine) to Turner Asia Pacific Ventures, which is held through its subsidiary NDTV Networks plc.

New Delhi Television Ltd (NDTV) has informed the BSE that the Company has, on December 08, 2009 entered into a conditional agreement with Turner Asia Pacific Ventures, Inc. (TAPV) for the sale of most of its indirect stake in NDTV Imagine Ltd (Imagine), which is held through its subsidiary NDTV Networks plc.

The total transaction size is $117 million (Rs 585 crore) and involves a sale of 76 per cent of NDTV Imagine for a consideration of $67 million (Rs 335 crore) together with the subscription to fresh shares in Imagine by TAPV for $50 million (Rs 250 crore).

& #BANNER1 & #Prior to the issuance of primary shares to TAPV, NDTV Networks plc will retain a stake of 5 per cent in Imagine. The transaction is subject to receipt of an approval from the board of Time Warner Inc (the parent of TAPV), and from regulatory authorities. Another 5 per cent stake is held by Dharma Productions. The names of the rest of the shareholders are not in the public domain.

In an email interaction with afaqs!, Vikram Chandra, chief executive officer, NDTV Networks plc., says, "This conditional agreement, together with the other three steps in the restructuring of NDTV Networks, means that NDTV will become debt free and cash surplus on a consolidated basis. Some of our key companies, such as Imagine and Lifestyle, have got the best media companies in the world as strategic partners, together with access to enough capital to achieve their full potential."

The other three steps, which Chandra refers to, include NDTV's recent deal with Scripps Networks Interactive, a leading developer of lifestyle-oriented content for television and the Internet in the United States. In November this year, Scripps bought a majority stake in NDTV's lifestyle unit for $55 million. Scripps Networks Interactive also acquired 69 per cent of NDTV Lifestyle, anchored by NDTV Good Times, the English-language lifestyle television channel, with NDTV Group retaining 31 per cent stake in the joint venture (JV).

The second development referred to is the purchase of $100 million step up Coupon Bonds due 2012, again in November by NDTV Networks Plc, a UK subsidiary of the company. The bonds were repurchased for $72.4 million. NDTV Networks Plc financed the repurchase through bank loans. Chandra points out that the bond overhang was potentially a very serious challenge. By taking out the bonds completely, a major risk factor has gone.

The third move mentioned by him relates to events reported in October this year, about NDTV buying back NBC Universal's 26 per cent stake in NDTV Networks.

Analysing the chain of events and its bearing on NDTV, Nikhil Vora, managing director, IDFC SSKI Securities Limited, explains, "These transactions take care of the funding requirement for NDTV Networks to buy back the 26 per cent stake from NBC Universal (estimated at $25 million) and the convertible instruments for $70 million (coupon of $100 million). Also, the fresh issuance in both these transactions would fund the investment losses of the GEC and the growth of lifestyle channels."

Vora adds, "These transactions show immense merit, as NDTV's balance sheet related concerns are addressed. Also, NDTV's balance sheet gets de-risked of the gestation losses in the non-news ventures. However, with profitability and scale of news operations yet under pressure, it's a neutral call on NDTV."

As per the assessment and estimates of IDFC SSKI Securities Limited, on account of self- funding of non-news ventures, Imagine is incurring losses of Rs 3 billion with GRPs of just over 100. With Turner infusing $50 million into the company, this would suffice for the gestation funding requirement of Imagine.

Also, unlike NBC Universal, Turner (Time Warner) has a stronger balance sheet and media properties globally. Turner made a foray into the Hindi GEC space in a JV with Miditech through the launch of Real; but the channel is already in virtual closure mode. In the lifestyle business, Scripps Networks Interactive will not only infuse $20 million to fund the growth, but would also strengthen the business operations with launches in genres such as food and travel.

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