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Zee, Star part ways...finally! - Views on News from Equitymaster
 
 
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  • Sep 25, 1999

    Zee, Star part ways...finally!

    Subhash Chandra promoted Zee Telefilms (ZTL) has wrested complete control of its three joint-venture companies from Rupert Murdoch by buying out Star TV's 50% holding in Asia Today (Zee's broadcasting company), PATCO and Siticable for a consideration of US$ 296.5 m (approximately Rs 13 bn).

    Zee (FY99 turnover: Rs 2.3 bn) is India's largest private sector satellite Television (TV) network. The company beams a portfolio of 7 channels to more than 75 countries. The company has also promoted Zee Music, Zee Education (ZED), and ZED Institute of Creative Arts (ZICA). It recently merged with Zee Multimedia Worldwide (ZMW), which owns and operates TV channels in Europe, USA and Africa.

    Star would be paid half the consideration (Rs 6.5 bn) in cash while the other half would be converted into equity in ZTL. The transaction would be subject to the approval by ZTL shareholders as well as regulatory authorities like the Reserve Bank of India (RBI). Initially, the payment will be in the form of notes, as Zee has still to work out ways of financing the deal.

    For Zee, the benefits of this buy out are manifold:

  • It will have access to the entire advertising revenues of Asia Today worth Rs 4 bn. Besides, it will have complete control on distribution, broadcasting and cable operations. With this, Zee's transformation from merely a programme provider to an integrated broadcasting company is complete.
  • Zee's dreams of becoming an Internet Service Provider by utilising Siticable network will get a fillip, as it is now the sole owner of Siticable.
  • The buy out also marks an end to disputes and court cases between Zee and Star for control of the joint-venture companies. Both parties can now run their businesses without restrictive clauses. Star, for instance, can go ahead with its Hindi programming, while Zee Telefilms could launch an English channel.

    Market view: The stock has been rated as a 'Long term Buy' by analysts because of the company's domination of the electronics media business in India, which has tremendous growth potential. Zee's recent consolidation of its group companies and the deal with Star is likely to improve its long-term earnings potential and hence its ratings with analysts.

     

     

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