In its Draft Red Herring Prospectus filed with SEBI, Global Broadcast News (GBN), which owns English news channel CNN-IBN, has for the first time revealed details about its arrangement with CNN.
“In consideration of the rights granted by Turner, our company has agreed to pay a licensing fee equivalent to 3.5 per cent of net revenue of CNN-IBN or the relevant annual minimum guarantee, whichever is higher, less any amount payable under the brand licensing agreement. The minimum guarantee is in the range of $500,000 to $850,000 for the said period. Further, in consideration of the archive content licensed to our company under the agreement, we are required to pay Turner $2,500,000 at the end of the third year of the term of the agreement,” the company disclosed.
The company had executed a brand license agreement with CNN on October 27, 2005 which enables it to use the name and logo of CNN. It has also entered into another news service agreement with CNN for production and broadcast services. The agreement is initially for a period of 10 years.
The company has also said that it would put Rs 45.85 crore in the relaunched IBN7 as part of its IPO proceeds, which includes Rs 11.5 crore to be infused in BK Fincap Pvt Ltd by way of a loan, which holds a majority stake in Jagran Pvt Ltd.
GBN has acquired 49 per cent stake in BK Fincap for Rs 68 crore to which the Gupta family has transferred 74.3 per cent of its shareholding in Jagran Pvt Ltd. Jagran Pvt Ltd is the original promoter of Channel 7(now rebranded as IBN7).
Out of the total consideration of Rs 68 crore, GBN has already paid Rs 33.65 crore. Further, under the share purchase-cum-shareholder agreement between GBN, BK Fincap Pvt Ltd, Jagran TV Pvt Ltd, New Vernon Private Equity Ltd and members of the Gupta family, GBN is under a contractual obligation to infuse funds amounting to Rs 11.5 crore in BK Fincap Pvt Ltd, before December 31, 2006. Thus, the company will be infusing a total of Rs 45. 85 crore into IBN7 out of the Rs 105 crore that the company will raise through the IPO.
Within a year’s time from April 11, 2006, Network 18 will hold 74 per cent of the equity share capital in GBN. Sameer Manchanda, Joint MD, GBN, will hold 10 per cent equity share and both Haresh Chawla, CEO, TV18 and Rajdeep Sardesai, Editor-in-Chief, IBN will hold 5 perc ent share each. The remaining 6 per cent will be held by GBN Employees Welfare Trust.