Anil Ambani co merging part of media business with Prime Focus, to pick 30.2% stake

Anil Ambani-led Reliance Group, which recently took one of its media companies Reliance MediaWorks (RMW) private, is merging a part of the firm with public listed Prime Focus to create a global media services powerhouse. In the process RMW will become a co-promoter of Prime Focus, which is backed by Standard Chartered Private Equity besides ace private investor Rakesh Jhunjhunwala.

RMW, earlier known as Adlabs Films Ltd which was acquired by Anil Ambani led group from Manmohan Shetty a few years ago, is moving its global film & media services business into Prime Focus.

RMW and the promoters of Prime Focus, Naresh and Namit Malhotra, will each infuse fresh equity capital of Rs 120 crore into Prime Focus at Rs 52 per share, through a preferential allotment, aggregating Rs 240 crore ($40 million). The equity proceeds will be used to fund the recent merger of Double Negative with Prime Focus World (PFW), a part of Prime Focus.

As part of the transaction, the India and overseas operations of RMW’s film and media services business will be combined with Prime Focus through a slump sale. The net consideration will be paid in the form of fresh equity shares of the listed firm valued at Rs 52 per share, roughly 67 million shares, as per VCCircle estimates, valuing the RMW asset at around Rs 348 crore ($58 million).

Post the preferential allotment and the business combination, the promoters of Prime Focus will own 33.5 per cent, while RMW will hold 30.2 per cent stake in the company.

The two have also simultaneously announced an open offer for Prime Focus, to the extent of 26 per cent of the fully diluted share capital of the firm at Rs 52 a share. This could cost as much as Rs 404 crore ($67 million), if fully accepted.

Assuming full acceptance in the open offer, the total deal value works out to around Rs 992 crore ($165 million).

EY India was the exclusive Advisor to RMW for the transaction and Centrum Capital was the exclusive Advisor to Prime Focus.

“We are hugely excited about the transformational growth opportunity created by the powerful combination of the global film and media services business of Reliance MediaWorks and Prime Focus,” said Amitabh Jhunjhunwala, group managing director, Reliance Group.

Namit Malhotra, founder, Prime Focus and executive chairman & group CEO, Prime Focus Group, said, “From being able to partner the world’s finest visual effects provider Double Negative, to having the Reliance Group come on board, to help mobilise our strategy in building the bridge between the West and the East. I am very confident about the benefits this combination brings to all our customers, employees and stakeholders worldwide.”

The deal comes close on the heels of Mukesh Ambani-led Reliance Industries taking control of Network18 Group in one of the largest media sector deals in the country.

RMW is majority owned by Anil Ambani-controlled Reliance Group with minority holding by its public listed financial services arm Reliance Capital.

Reliance Group has a number of separate private firms in the media and entertainment space straddling areas like movie production, multiplex and direct-to-home services.

It also delisted another listed media firm Reliance Broadcast Network Ltd (RBNL) early this year. RBNL is a media entertainment firm with operations across radio, television, TV production and intellectual properties.

It houses radio FM network under 92.7 BIG FM besides a string of television broadcast properties, including BIG CBS Networks (JV with CBS Studios offering English entertainment channels - Love and Prime, as well as a regional channel Spark Punjabi), BIG RTL THRILL (action programming channel under a JV with Europe's RTL Group), BIG MAGIC (local language general entertainment channel which has also expanded to international markets targeting the diaspora). In addition, RBNL has a television content production division and a media sales unit under BIG Connect.

Combined business

The deal will result in the immediate extension of Prime Focus’ infrastructure across India, the UK and North America. The deal will bring under its fold a total of one million sq ft of facilities including studio in Film City, Mumbai; 30 per cent stake in renowned Hollywood VFX house, Digital Domain, known for its award winning VFX work on Titanic and The Curious Case of Benjamin Button, etc besides 100 per cent ownership of Los Angeles-based digital film restoration firm, Lowry Digital.

The combination will have combined revenues in excess of Rs 1,800 crore (including the recently announced merger of Double Negative with PFW), and robust order pipeline of Rs 2,000 crore.

Namit Malhotra will be executive chairman and Global CEO of Prime Focus and will continue to lead the operations.

The combined business would have operations in India, Los Angeles, London, Vancouver, Singapore, Beijing, etc and global talent pool of over 5,500 people.

The combination of RMW – Prime Focus and Academy Award winning Double Negative, led by Matt Holben and Alex Hope, creates one of the world’s largest and the most integrated media services group with presence across 20 locations offering visual effects, stereo 3D conversion, animation and cloud-based digital media solutions that transcend the film, advertising and television industries.

The body of work handled by the merged entity would include worldwide blockbusters and critically acclaimed films, such as The Dark Knight Trilogy, Transformers 4, Inception, Gravity, Harry Potter and Avatar, among others.

The combined group will also have the world’s first hybrid cloud-enabled media ERP platform, which virtualises the content supply chain and helps broadcasters, studios, brands, sports and digital businesses manage their business of content, by driving creative enablement, enhancing ecosystem efficiencies and sustainability, reducing costs and realizing new monetization opportunities.

(Edited by Joby Puthuparampil Johnson)

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