Dish TV & Videocon d2h mergers as a single DTH Co.
Direct-to-home television operator Dish TV to merge with Videocon d2h,( Vd2h) creating India ' s largest media company by sales. Dish TV is the market leader in the DTH space while Videocon is the third largest by subscribers. Vd2h is an Indian entity with its ADS listed on NASDAQ, while Dish TV is listed on NSE & BSE. The combined entity will be renamed Dish TV Videocon Limited( MergeCo)
Key terms:
Exchange ra�o:
· Dish TV Videocon Ltd will issue 857.79MM fresh shares
· 1 share of Vd2h = 2.021 shares in Dish TV Videocon
· Post-deal, Dish TV shareholders = 55.4 % Vd2h shareholders = 44.6 %
Financial Advisors:
· Dish TV— Morgan Stanley
· Videocon d2h— Yes Securi�es
ADS( American Depositary share) is a U. S. dollar-denominated equity share of a foreignbased company available for purchase on an American stock exchange.
GDR( Global Depositary Receipts) is compulsory for foreign company to access in any other country ' s share market for dealing in stock. But American depository receipt( ADR) is compulsory for non-US companies to trade in stock market of USA.
Lis�ng on exchange
· MergeCo shall con- �nue to be listed on the NSE and BSE in India
· MergeCo shall ins�tute a new GDR lis�ng on the Luxembourg exchange
· In the Scheme, holders of Vd2h ADRs will receive their new shares in the form of GDRs.
Deal Ra�onale:
· The benefits of scale are expected to be immediate and significant, right from combined purchasing, product development and distribu�on to customer service and support.
· Be�er growth opportuni�es for employees along with the added reduced infrastructure and network capex makes this an excellent move.
· Videocon with its exper�se in distribu�on and service along with manufacturing advantages complements the content sourcing and media experience provided by Dish as its forte.
· The combined en�ty would not only benefit from these synergies but also be able to create alterna�ve revenue streams in the form of carriage, adver�sing, certain value-added services and new channel launches.
Our 2 cents: The satellite TV market in India with at least 7 players as opposed to 2-4 in most other countries, has been due for consolidation. The surprise though was when two of the biggest players in the industry were the first in a move of consolidation. The fragmented industry means huge benefits for larger players and this combined entity( 45 % share) stands a long way ahead of its closest competitor Tata Sky( 24 % share). Most companies in this space have only recently started reporting profits after booking losses for the previous 10 years indicating benefits for large incumbents. The acceleration of digitization with set-top boxes made mandatory as per the Digitalisation of Analogue Cable System Ordinance should result in exponential growth in the market creating room for growth for the DTH players. HD TV is also gaining popularity – a high margin business for the companies.