Sony’s stake hike allows MSM flexibility: Man Jit Singh. Regional/niche channels on anvil

15 Jun,2012

This is one soap that Sony Entertainment Television bosses are happy to see the end of. Over two decades ago, a group of seven entertainment industry biggies (including then superstar Jackie Shroff) and Sony Pictures got together to launch Sony Entertainment Television.  There were also rumours of senior minister Sharad Pawar’s brother-in-law Sadanand Sule having a stake. Multi Screen Media, as the company was called, had a complex shareholding, as is the case with many Indian corporations.

 

Four years back, the minority shareholders were in a legal tangle which was finally resolved, but it was evident that they wanted to cash out soonest.

 

So when the communique reaches media inboxes on Sony Pictures’s announcement of an agreement to acquired around 32 per cent of MSM’s shares currently held by Grandway Global Holdings Limited and Atlas Equifin Private Limited. The transaction, which will bring Sony’s stake in MSM to a little over 94 per cent, will close by end-December 2012.

 

Under the terms of the agreement for this acquisition, aggregate cash consideration of $271 million will be paid by SPT to Grandway and Atlas, subject necessary government approvals, with $145 mn to be paid by December 2012 when the transaction ends and the balance $126 million will be paid in in three equal annual installments starting from the fiscal year ending March 31, 2014.

 

“SPT has enjoyed great success with our channels in India and this acquisition further demonstrates our commitment to entertaining Indian audiences,” said Andy Kaplan, president, worldwide networks, SPT in a statement. “We’d especially like to thank Grandway and Atlas for their entrepreneurial spirit that helped to get this venture off the ground 17 years ago.”

 

MSM chief executive Man Jit Singh (who as a Sony representative was chairman of the Board even when Kunal Dasgupta was CEO) spoke to MxMIndia’s Pradyuman Maheshwari from London on phone. Excerpts from the interview:

 

This thing has been going back and forth for a while between Grandway, Atlas and Atlas.

Yes, it’s been some time.

 

So, is it only a cash transaction or with there be a non-cash consideration as well?

As stated in the press release that it is $271 mn transaction of which there is a upfront payment of $145 mn and then three equal installments.

 

And the balance 6-odd per cent?

The balance 6 per cent  is held by a fund called the Capital Group which is not part of this transaction.

 

Capital has had some stake for a while…

Yes, they’ve held the stake from 2001. The Indian stakeholders are exiting. Capital Group is another transaction.

 

Are you happy with the 1 bn-odd valuation of the company?

We are delighted with the valuation which happened at the end of an extensive private equity process which determine the market value and then Sony stepped in and decided to acquire the stake, which for us is great news. Because now: a) it show Sony’s commitment towards India and to the channel operation and b) it will give us a lot of flexibility in running our business. And we’ll be able to make investments as we go forward. So, we are delighted with this news.

 

In the year around 1999, I think the evaluation was something around 2.5 bn. And that was of course the first high that Sony had reached. And now it’s come down quite a bit.

As you know, perhaps it was a little later. But as you know during the dotcom period the valuations which were thrown around were extraordinarily high. I think that it was a moment in time, the markets have settled and businesses have fairly matured and I think the valuations are where they are and they are correct.

 

You mentioned that this will allow some more freedom for doing various things so anything on the anvil. You’ve spoken about regional channels in the past and you did buy this Bengali channel. Anything more…

As you know, we are in the process of acquiring a stake in Maa TV which we have announced already and that will continue. We’ll take opportunities as they come and we now have the flexibility to move quickly and consummate those opportunities. And we look forward to doing that.

 

Is there any particular direction that you are looking at?

We are certainly looking at regional channels as we are interested in regional channel space. And as you know we have made a major investment in our sports channels. And we expect that sport is an area where you have to continue to buy rights when they become available because you have to bid for them. And we’ll be in a position to make those investments when they come to us.

 

But those investments you have made. Sony is already investing a fair bit for this acquisition and you’ll have to make a lot more investments for all of this.

Correct.

 

That mandate you have received…

Yes. By investing in MSM, Sony has shown its willingness and enthusiasm for the Indian market. And they are very very open to continue….

 

Is there anything else you are looking at other than channels because digitalization will allow all that to happen?

Absolutely. We believe that digitalization is going to make us able to deliver different kind of content to smaller segments of viewership. So we believe that there will be opportunity to create niche channel. This will certainly help us by allowing us to look at all those opportunities. We believe there is a good amount of things that can be done over the next two-three years.

 

The last two years have been tremendous for MSM because we have Sony doing so well, SAB is doing so well and IPL hasn’t been too bad. So would you credit that for the way things are right now and at Sony’s commitment?

I think you have to look at Sony’s commitment which was committed in the good times as well as in the bad times to MSM. It is only that its bigger commitment is to the Indian market. Sony has always believed that India is one of the most important of the BRIC countries and it’s a place where Sony must invest and grow the market. So there has been a commitment to India. So we should give them credit for being consistent in their beliefs that India should be one of the key markets in which certain focus is on. And not only that but on the channel business, our electronic business side, it is a growth market for us on both sides.

 

And will we see some synergies with all of that all, in the near future?

Absolutely. This will give us much more flexibility to be able to create synergies between our electronic groups and our channel business. And we see opportunities to bring things together.

 

Is there a possibility of a change of the company name now that Sony’s ownership is near-total? Perhaps Sony Entertainment Television…

Why you don’t like MSM?

 

No, I love it. One has got used to it. But still the fact is that now since it’s a Sony it could well be called that. Is it on the cards?

I’ll be honest; we don’t have any plans to do that. But thank you, I’ll think about it (laughs). I’m quite happy with MSM, maybe because we all came up with it. There is no such plan. We are quite satisfied with it. Also, the channel is Sony Entertainment Television. So, I’m not sure if we’ll need to change the company name. Let’s put it this way, there has been no talk on this.

 

With inputs from Meghna Sharma

 

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