Walt Disney (DIS) – India – December 15, 2023
Walt Disney and Reliance Industries are reportedly wrapping up a merger agreement. Bloomberg says this could be announced next week; other outlets say it will be done by next month. Regardless, the negotiations are at a very late stage in what would create the largest media company in India.
Disney will sell at least 51% of its India media business and merge its Star India business with Reliance’s Viacom18. This would transform Reliance from a fierce foe in that important market into a tight ally. Reliance, in the past, has done things like outbid Disney for cricket rights. It even offered those rights for free in what makes Reliance nearly impossible to match in India. So? Disney won’t try to match them. It will join forces. As an aside, it eventually must do the same thing with ESPN and mega-cap tech… but I digress.
Rough estimates point to Disney’s India segment being worth about $10 billion. The companies will supposedly each infuse about $1.5 billion into the new business. Considering this, at the very least, the move should represent more than $4 billion in cash added to its balance sheet. The newly formed media group will then get exclusive streaming access to Disney+ for 5 years.
The deal also allows Disney to focus on its core markets and core intellectual property. India was causing a major cash burn with incremental revenue being a distant second outcome. This will tighten Disney’s focus to higher priority businesses. It will do so while freeing Disney to participate in India’s upside, without being in charge of steering that upside. Why not tap into Reliance’s unmatched market presence and distribution? That’s the plan.