After months of speculations and conjectures, Reliance Industries and The Walt Disney Company on Wednesday finally formally announced the signing of the binding definitive agreement to form a joint venture (JV) that will combine the businesses of Viacom18 and Star India. The highly anticipated merger, which will be completed in the last quarter of calendar year 2024 or first quarter of calendar year 2025, will create the largest media entity in India and is expected to change the broadcast landscape in the country.

According to the official statement, the media undertaking of Viacom18 will be merged into Star India Private Limited (SIPL) through a court-approved scheme of arrangement. Giving a thumbs-up to the move, legal professionals say a court-approved plan is essential since it adds another level of inspection to guarantee adherence to relevant laws. 

“In the merger scenario, a court-approved scheme plays a crucial role, introducing an additional layer of scrutiny to ensure compliance with relevant laws,” said Rohan Rai, Associate Partner, RR Legal Partners LLP. Rai explains that the merging entities present a comprehensive proposal detailing aspects such as share exchange ratios, creditor treatment and the impact on employees, subject to review and approval by the court.

“This process, guided by considerations of fairness and potential objections from stakeholders, safeguards the interests of all parties involved,” Rai mentioned.

In the statement issued on Wednesday Reliance and The Walt Disney Company said the transaction is subject to regulatory, shareholder and other customary approvals, and the media undertaking of Viacom18 will be merged into Star India Private Limited.

According to Rohit Jain, Managing Partner, Singhania & Co, in India, a court-approved scheme of arrangement is a legally sanctioned process governed by the Companies Act, 2013. The scheme aims to facilitate various corporate actions, including mergers, amalgamations and restructuring. 

“It provides a framework for companies to reorganize their operations, capital structure or ownership. Companies seeking to implement a scheme of arrangement must approach the National Company Law Tribunal (NCLT). Approval requires a majority vote: A majority representing 3/4th in value of the creditors (or a specific class of creditors) and of the members (shareholders). The NCLT reviews the scheme and ensures compliance with legal requirements. Once approved by the NCLT, the scheme becomes legally binding. The tribunal ensures fairness and protects the interests of shareholders, creditors, and employees,” shared Jain.

Shivam Kumar, Associate, SKV Law Offices, explained that such mergers are structured through a scheme of amalgamation which requires the companies involved to obtain approval from their shareholders and creditors which needs to be sanctioned by the National Company Law Tribunal or the designated Company Court.

The court may, during the process, order a meeting of the creditors/shareholders of the company. And if the majority in number, representing 3/4th in value of the creditors and shareholders present, votes and agrees to the merger, then the merger, if sanctioned by the court, is binding on all creditors/shareholders of the company.

“It means that the merger of Viacom18's media undertaking into Star India Private Limited will be carried out according to a specific plan or scheme that has been formulated and agreed upon by the companies involved. This scheme will then be presented to a court for approval. Once approved by the court, the merger can proceed according to the terms outlined in the scheme, and the companies can combine their businesses as planned and agreed upon,” said Kumar.

RIL has agreed to invest at closing ?11,500 crore (US$ 1.4 billion) into the JV for its growth strategy.The transaction values the JV at ?70,352 crore (US$ 8.5 billion) on a post-money basis, excluding synergies. Post completion of the above steps, the JV will be controlled by RIL and owned 16.34% by RIL, 46.82% by Viacom18 and 36.84% by Disney. Disney may also contribute certain additional media assets to the JV, subject to regulatory and third-party approvals. The joint venture (JV) will have over 750 million viewers across India and will also cater to the Indian diaspora across the world.  

Nita M. Ambani will be the Chairperson of the JV, with Uday Shankar as Vice Chairperson.