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Disney Offers to Buy Out Partners in Indian Media Company

The Walt Disney Company made a $454 million offer to buy out its partners and public shareholders in an Indian media company, the companies said on Tuesday.

Disney offered 1,000 rupees ($22.58) a share to acquire the 49.6 percent stake that it did not already own in UTV Software Communications, which makes movies, operates TV channels and produces video games in India’s fast-growing market. The offer is about 11 percent above UTV’s closing share price on Monday.

In a statement, Disney said it had started a process to delist shares of UTV from Indian stock exchanges, which could take several months. If the company is successful, it will also take over the stakes of the husband-and-wife founders of UTV, Rohinton Screwvala and Zarina Mehta. Mr. Screwvala would then join Disney as the head of its Indian operations, the company said.
In 2006, Disney spent $44.5 million to buy a 15 percent stake in UTV and acquired Hungama, a television channel for children’s programming created by UTV. Since then, it has increased its stake in UTV to 50.4 percent.

UTV’s share price has climbed steadily in the last 12 months after tumbling in 2008 during the global financial crisis, when it became very difficult for Indian companies, especially those in the media business, to raise money from investors.
On Tuesday, UTV shares jumped 5.4 percent, to 950.45 rupees, after the Disney offer was made public.

The company earned $30.6 million in the year ended March 31, up from $12 million in the period a year earlier.

The Indian media market, while growing fast, is highly competitive and fragmented. Most TV channels struggle to make money because there are a dozen or more players in every segment of the market.

The Hindi film business, known as Bollywood, churns out about 200 movies every year and ticket sales do not cover the cost of production for many of them.
“India is not the sort of a market where you come in with your money and say I will leave in three years,” said Vanita Kohli-Khandekar, author of a book titled ‘‘The Indian Media Business.’’
“There are only three studios who have managed scale in this business,” Ms. Kohli-Khandekar said, adding that UTV was one of them. “To manage scale in the media business in India is very, very difficult.”

Most large global media companies have some presence in India. The News Corporation and Viacom operate the popular Star and Colors TV networks respectively. Sony has a big presence in the TV market as well, and is reportedly negotiating to buy a regional network from Eenadu TV, which is based in the southern city of Hyderabad.

Disney is a more recent entrant into the Indian market, and much of its business is concentrated in children’s entertainment. The company does not have a general TV channel in India, for instance, but the Disney channel is available on cable and satellite systems here. It released its first Indian film, “Do Dooni Chaar” or “Two Times Two Is Four,” in October.

UTV and Mr. Screwvala could help it get access to more movies and other content in India. The company has co-produced several successful films with Aamir Khan, the Bollywood star and heartthrob, including the recent movie “Delhi Belly,” which was very popular with young Indians because of its obscenity-laced script.

Disney and UTV executives declined to comment beyond their written statements.
This move promises better opportunities in India in terms of quality and quantity of work in India.

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