STAR Network’s affiliate Asian Broadcasting FZ-LLC (ABF) and Balaji Telefilms announced a definitive agreement under which ABF would issue approximately 13.694 million shares at Rs 90 per share to clinch a 25 per cent stake in Balaji Telefilms with a total investment of Rs 1.23 billion.
The market was abuzz with the rumours for almost three weeks now and a reflection of that can be seen in the steady increase in the Balaji shares bringing it to its current 92.15. Will this increase the Balaji share price further? “Not necessarily,” says Farokh Balsara, Industry Leader, (Media and Entertainment Practices) Ernst & Young, “Mostly an increase like this is a result of speculations. The price mechanism is a function of the availability of the share.”
Speaking more on how it affects the parties involved, he says, “It secures the customer-vendor relation. STAR is Balaji’s biggest client and Balaji provides substantial amount of content to the channel.” He also emphasises that at the same time, STAR will have only some pre-emptive rights on Balaji operations, “They can block just some aspects of operations but apart from that, Balaji would still function as an independent entity.”
Commenting on the deal, Michelle Guthrie, CEO, STAR says, “We are thrilled to acquire a stake in Balaji, with whom we enjoy a productive relationship. Balaji, under the continuing management and leadership of the Kapoors and with its pool of creative talent, has become an important company in the evolving and increasingly competitive Indian media sphere. As STAR continues to expand its services and offer more choices to viewers, we see enormous strategic benefits from strengthening our relationship with Balaji.”
Jeetendra Kapoor, Chairman, Balaji Telefilms, on the other hand expresses, “We are excited having STAR as an investor in the company. We believe that the investment made in the company would assist us in achieving a higher level of growth and in the process generate significant value for all the stakeholders.” Ambit Corporate Finance acted as the exclusive financial advisor to Balaji Telefilms Limited for the above transaction.