Bharti Airtel to Buy Stakes in Dish TV

Close to 2 years after the proposed deal between Airtel and Dish TV fell through over valuation differences, the deal appears to be back in the reckoning. As per market reports, Bharti Airtel is in early talks to acquire a majority stake in Dish TV.

If the deal goes through and Airtel gets a controlling stake, it will give the combination more than 50% of India’s satellite television pie and beat Tata Sky in the market share game, which has cornered 33% of the DTH market.

It has been reported that top officials of Bharti Airtel have had detailed deliberations with Subhash Chandra of the Essel group and more details are expected to emerge in the coming days. Currently, EY has completed the due diligence of Dish TV financials on behalf of Bharti Airtel and submitted the report more than a month ago. 

Apparently, the offer made by Bharti Airtel is in the vicinity of Rs.20 per share, which is 16% above the CMP. This is to buy out the 5.93% stake in Dish TV owned by the Subhash Chandra Group.

It may be recollected that Dish TV is currently fighting a pitched battle for control with Yes Bank, which owns 25.63% stake in Dish TV due to confiscation of pledged shares of Dish. Eventually, Yes Bank’s buy-in will be critical to this deal.

Bharti, on its part, has decided not to make a hostile bid for Dish TV but has agreed to buy out the 25.63% of Dish TV owned by Yes Bank, once the promoters accept their offer. They will also make an open offer to public shareholders, as per extant SEBI regulations, with the intent of taking their stake in Dish TV to above 51%.

Yes Bank has been pressuring Dish TV to remove Jawahar Goel from the helm of Dish TV. Jawahar is the younger brother of Subhash Chandra. However, it is not clear whether Bharti would be coming as a White Knight in this case. In a similar case, when Zee had problems with its largest shareholder Invesco, Sony Pictures had agreed to merge with Zee.

Check - What does the Zee merger with Sony mean?

For Bharti, this is a game of leadership in the satellite television space. The Airtel DTH business reported 5% higher revenues of Rs.3,056 crore for FY21, while Dish TV revenues were slightly higher at Rs.3,249 crore. However, Airtel DTH had a higher EBITDA compared to Dish TV.

The deal would be a blessing in disguise for Airtel as it would get a dominant market share of 50% in the DTH space, compared to just 33% for Tata Sky. At the price of Rs.20 per share, the offer is at 1.50 times EV/EBITDA.

This is much lower than the peer group average for similar deals. Eventually, the success of the deal would predicate on Chandra accepting the offer and Yes Bank buying into the deal and monetizing its stake.

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