Promoter Ronnie Screw-vala is buying out STAR’s remaining 12 per cent stake in UTV Software Communica-tions at Rs 68 per share while acquiring 12 per cent of CDP at Rs 120 per share.
Mr Screwvala is buying STAR’s 1.7 million shares for Rs 11.7 crore and 1.8 million shares of CDP for Rs 21.6 crore. With this, Mr Screwvala is consolidating his holding in UTV to 54 per cent, before the proposed initial public offering. The total holding of the promoter group will get reduced to 44.86 per cent after the IPO.
In June 2004, STAR had sold 3 per cent of its stake to Mr Screwvala for Rs 2.9 crore. This amount has already been paid. STAR held its stake through Acetic Investments Ltd, a Mauritius-based company. Unilazer Exports and Management Consultants Ltd, a company held by Mr Screwvala, has agreed to pay and complete the transaction with Acetic Investments before September 30, 2004.
CDP, a 100 per cent subsidiary of Capital Communication CDPQ Inc, will sell another 3 million shares through the ‘offer for sale’ along with the IPO. CDP held 32 per cent stake with its 4.8 million shares. For the 1.8 million shares, Mr Screwvala will make the payment of Rs 21.6 crore through Unilazer Hong Kong Ltd.
The price of STAR’s and CDP’s stake differs. This is because STAR’s price was fixed at a pre-determined formula. “When STAR picked up 49 per cent stake in UTV, Mr Screwvala had a buy back option before the IPO. He is exercising that option. The price was arrived at through a pre-fixed formula,” said a source in the company.
Of the IPO proceeds, UTV plans to invest Rs 20 crore in United Home Entertainment for funding of kids channel ‘Hungama TV.’ A further investment of Rs 16.37 crore will be for movie distribution business, Rs 6 crore for purchasing real estate for new office, Rs 5 crore for upgrading post production facilities, and Rs 2 crore for editing and other equipment.
The kids channel will require a total investment of Rs 75 crore over three years. Mr Screwvala will invest Rs 5 crore while efforts are on to raise further equity and debt funding of Rs 50 crore. While Mr Screwvala will hold 51 per cent, UTV will have the balance 49 per cent. After finding an equity investor, both UTV’s and Mr Screwvala’s holdings will get diluted.
UTV will have the status of preferred vendor for procurement of fresh programming for United Home Entertainment for a period of five years from the date of launch of the channel.