Bharti Airtel executives have had discussions with Essel Group founder Subhash Chandra over the transaction, the people said, seeking anonymity.
EY, which Bharti Airtel hired to inspect Dish TV’s finances, submitted the due diligence report to the telecommunications company on Oct. 25, one of the people named above said.
“The promoters of Airtel and Subhash Chandra are in talks,” said the second executive. “Once Mr. Chandra approves the deal, he will make a recommendation to the president (of Dish TV), who, with the board of directors, take an independent opinion.
Bharti Airtel offered ??20 per share, a 16% premium over Wednesday’s closing price, to buy the 5.93% stake in the promoter group Dish TV, the second executive said.
So far, Chandra has not accepted Bharti’s offer, the third executive said, adding that this made Bharti Airtel wait before contacting Yes Bank, Dish TV’s largest shareholder.
A spokesperson for Yes Bank said he had not had any discussions with Airtel in this regard.
Bharti Airtel will not make a hostile offer on Dish TV, the second executive said, adding that the telecommunications company will only offer to buy the 25.63% of the shares held by Yes Bank once the promoter group has accepted Airtel’s offer.
Once the promoters and Yes Bank accept Bharti’s offer, Bharti will offer to buy the remaining Dish TV shares from other shareholders to own 51% of the company, the executive said. Yes, the Bank’s support for the deal will be crucial.
“Discussions have taken place, but it is difficult to say whether this will bear fruit. There are several complexities involved, ”said the third executive.
One of the complexities, the person said, is that Airtel will have to convince both the promoters of Dish TV and Yes Bank to complete this transaction.
Yes Bank is pushing for a replenishment of the Dish TV board, including calling for the removal of chief executive Jawahar Goel and four other six-member board members and the induction of seven directors.
Another issue will be that Dish TV is a listed entity and Airtel DTH is a private entity.
The promoters of Dish TV pledged their actions to take loans from Yes Bank between December 2016 and July 2018. Yes Bank invoked the pledge last year after Essel Group stopped handling the loans.
A spokesperson for Dish TV said the company is not commenting on market speculation. An email sent to Bharti Airtel and EY requesting comment went unanswered.
Bharti Airtel’s offer to buy Dish TV, which faces a revolt from its largest shareholder, somewhat reflects developments at Zee Entertainment Enterprises Ltd, controlled by Subhash Chandra, which is also battling with its largest shareholder, Invesco, a fund manager based in the United States.
After Invesco pushed for the removal of CEO Zee Punit Goenka and called for a board replenishment, Chandra succeeded in getting Japanese Sony to sign a non-binding merger agreement, under which Sony will own 53 % and the current shareholders of Zee will own the remaining 47%.
Bharti Airtel’s DTH activity recorded sales of ??3,056.2 crore, a 5% growth in the fiscal year ended March 31, while Dish TV’s revenue declined 8.6% to ??3,249.4 crore last year. EBITDA improved by 4% to ??2,078 crore at Airtel as it fell 4.2% to ??2,017 crore on Dish TV. Unlike Dish TV, Airtel also increased the number of DTH subscribers by 6.6% in the fiscal year ended March 31, for a total of 17.2 million users.
Earlier this year, Airtel bought a 20% stake in its DTH business from private equity firm Warburg Pincus for ??3,126 crores, which translates to 7.6 times the EV / Ebitda or valuation of a business in relation to its cash profits minus non-cash expenses. It measures the cost of acquiring a business.
“If Airtel manages to get this agreement signed ??20 per share, then that will be a huge bonus for the company as it implies that this deal is structured at 1.5 times EV / Ebitda, ”said the second person cited above.
Bharti Airtel and Dish TV have a combined market share of almost 50% in the DTH space in India, with Tata Sky occupying the top position with 33.3%.
Separately, Airtel and Dish TV held 25.54% and 24.09% respectively.
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