Financial Daily from THE HINDU group of publications
Wednesday, Mar 13, 2002
Mergers & Acquisitions
Corporate - Mergers & Acquisitions
Zee acquires 64 pc stake in Padmalaya
Mr Subhash Chandra (left), Chairman, Zee Telefilms, and Mr G.A. Seshagiri Rao, Managing Director, Padmalaya Telefilms Ltd, at a press conference in Mumbai on Tuesday.
MUMBAI, March 12
ZEE Telefilms Ltd (ZTL) announced on Tuesday that it is acquiring a strategic stake in Padmalaya Telefilms Ltd (PTL) through the acquisition of 64.3 per cent stake in PTL's holding company, Padmalaya Enterprises Pvt Ltd (PEPL).
The multi-layered deal will cost ZTL Rs 59 crore for the 32.8 per cent stake in PTL. This includes a preferential allotment to be made by PTL to PPEL, and a mandatory 20 per cent open offer the holding company will have to make following the change in the ownership of promoters' holding. The preferential allotment will be at a price of Rs 142.20 per share and the open offer will be at the price of Rs 148.50 per share.
ZTL has entered into an MoU with PTL for this acquisition.
According to Mr Subhash Chandra, Chairman, ZTL, the investments had to be made through the holding company to get a larger stake. "If ZTL had invested directly in PTL, its holding would have been around 16 per cent. Then acquiring another 35 per cent stake from the market to gain control would have pushed our costs up considerably."
The acquisition has been structured in such a way as to make ZTL an effective partner. Therefore, PEPL has been constituted as the holding company of PTL, according to Mr Sandip Goyal, Group Broadcasting CEO of ZTL.
ZTL will hold 64.3 per cent in the holding company while PTL's existing promoters, Mr Seshagiri Rao and family will hold 36 per cent.
Existing promoters of PTL have transferred 22.5 lakh equity shares of Rs 10 each held in PTL to the holding company at a price of Rs 142.20 per share for a total consideration of Rs 31.99 crore. However, the promoters will continue to hold a five per cent stake directly in PTL.
As per the deal, PTL will allot two million fully paid-up equity shares at a price of Rs 142.20 per share to PEPL. For subscribing to this allotment, ZTL will provide a fund of Rs 28 crore to PEPL.
PTL has convened an extraordinary general meeting of PTL on March 27 to seek shareholder approval for the preferential allotment.
Subsequent to this preferential allotment, PEPL will make an open offer to the shareholders of PTL at a price of Rs 148.5 per share to acquire an additional 20 per cent stake in PTL. ZTL will fund this open offer. This will cost ZTL Rs 32 crore.
Post-preferential allotment and open offer, PPEL's holding in PTL will be 51 per cent.
ZTL and the promoters of PTL would jointly control management of PTL. Both Zee and PTL promoters have right to appoint their nominees on the board of PTL in proportion to their respective shareholding PTL and PEPL.
Zee's acquisition of PTL creates an entertainment powerhouse with strengths in animation software, film production and distribution and television content.
Following this deal, ZTL will be able to capitalise on PTL's experience in movie production and distribution, use production facilities, leverage PTL's direct control over 60 theatres in south India and will own library of 300 films.
As for PTL, the deal will allow it direct access to buyers overseas because of ZTL's strong international presence.
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