February 19 2008

Disney lifts stake in India's UTV
Joe Leahy
Financial Times
(c) 2008 The Financial Times Limited. All rights reserved.

The Walt Disney Company will pay Rs8.1bn (Dollars 204m) to increase its stake in India's UTV Software Communications in one of the biggest investments yet by Hollywood in South Asia's entertainment sector.

The US media company will increase its holding in UTV from 13.7 per cent to 32.1 per cent as part of plans to deepen co-operation with its Indian partner.

The pair are already in early discussions to make what would be Disney's first live-action, Hindi-language feature film if the plans are realised.

"This is more evidence that, on the media front in Asia, India is it. There's tonnes of investment coming in," said Vivek Couto, executive director at research firm Media Partners Asia.

Founded by Indian media entrepreneur Ronnie Screwvala, UTV's businesses range from moviemaking to broadcasting and gaming.

The group is known overseas for last year's box-office hit The Namesake . Last weekend, it released a lavish Mughal epic for the domestic market, starring Aishwarya Rai Bachchan, the beauty queen-turned-Bollywood megastar.

Disney's increased commitment to UTV follows a series of similar deals being agreed in India, with NBC Universal buying a 26 per cent stake in the entertainment division of New Delhi Television for Dollars 150m and Viacom partnering with TV18, which runs India's version of CNBC.

Under Indian stock market rules, Walt Disney will be required to launch an open offer for an additional 20 per cent of UTV. But Andy Bird, chairman of Walt Disney International, said the US group had agreed not to exercise its voting rights beyond those applicable to the 32.1 per cent stake.

Walt Disney will also invest an additional Rs1.2bn for a 15 per cent stake in UTV's broadcasting unit, UTV Global Broadcasting. Under his part of the deal, Mr Screwvala will invest Rs3.9bn through a warrant issue to consolidate his stake in UTV at 32.1 per cent.

The deal, which will result in total new investment in UTV of about Rs13.1bn, will give Mr Screwvala more funds to roll out a suite of new cable channels.

UTV is among India's most ambitious film production houses, with plans to release 20 movies this year at a production cost of Dollars 120m.

Mr Bird said Disney remained committed to its own operations in India, which include a children's station Hungama it earlier bought from UTV and a stake in ESPN.

But he said UTV would enable it to tap into another source of growth in India.

Mr Screwvala said the partners were already exploring new areas of co-operation, although no details were yet available.

UTV Software shares fell 4 per cent to Rs828.25 yesterday, after earlier rising as much as 10 per cent.