Parks Forward Commission Draft Recommendations (DRAFT - July 30, 2014)
Investment in Maa TV Presentation to Michael Lynton July 9 th, 2012 DRAFT July 3 rd, 2012 DRAFT FOR...
-
Upload
mitchell-johns -
Category
Documents
-
view
214 -
download
0
Transcript of Investment in Maa TV Presentation to Michael Lynton July 9 th, 2012 DRAFT July 3 rd, 2012 DRAFT FOR...
Investment in Maa TV
Presentation to Michael Lynton
July 9th, 2012
DRAFT July 3rd, 2012
DRAFTFOR DISCUSSION ONLY
2
Maa Deal StatusDRAFT
• Drafts of the Shareholder SHA and SPA exchanged. We do not expect any major problems
• SPE to acquire 52.3% of Maa TV for a total purchase price of INR 6.1BN ($111M) with a fully-diluted 51% to be acquired at close and an additional 1.3% to be acquired in FYE15
– SPE will acquire 51% of fully-diluted equity at close for INR 5.9BN (~$107MM) by purchasing shares from existing shareholders
– Includes assumption of ~$9MM in debt, which is considered cash outflow at close due to consolidation. The debt will be paid off post-close but could alternatively be refinanced at a lower rate
– Additional 1.3% to be purchased in FYE15 from employee stock option holders for INR 200MM (~$3.6MM)
– Purchase price derived as 22x reported FYE12 EBITDA of INR 482MM ($8.8MM). EBITDA figures presented reflect adjustments due to FYE12 interest and other income items being non-operating
• Maa TV performance year-to-date is on budget Q1 EBITDA is INR 138MM ($2.5MM)
• In terms of FYE13, multiple of acquisition is 21x EBITDA vs. 24x trailing multiple
• SPE will have a call option on the 47.7% minority position beginning on the 5th anniversary of closing
– Call option will be for fair market value, determined by mutual agreement, or by independent valuation if agreement cannot be reached
– If SPE does not exercise its call by the 7th anniversary of closing, minority shareholders can force a sale of 100% of the company to a third party
120
140
160
180
200
220
240
260
Source: Deloitte Valuation
Third Party Valuation
$257
$235
$195
$168
$144
Proposed SPE Price ($212MM) for 100%
($MMs converted from INR at 55 INR:USD)
• Deloitte Touche Tohmatsu (D&T) was engaged to value Maa TV
• SPE’s proposed purchase price is at the low end of the value that SPE or another strategic buyer is expected to derive from this acquisition of Maa TV
Independent Fair Market Value Range – 100% Value
3
• At SPE’s proposed price of $111MM (including $9MM debt assumption) for 52.3%, SPE’s estimated post-tax IRR is 17% and payback is 11 years
Notes: These comparables do not include ETV that would be considerably higher. Transaction comp includes Asianet-Star acquisition, adjusted for time since close. Public comps include Sun TV and Zee TV, both of which have operations in Andhra Pradesh
DRAFT
$208
19.1x
16.4x
29.2x
23.6x
26.7x
22.2x
WeightedOverallValue
DCFComps
Public/Trans
Financial Impact to SPE
4
EBIT Impact• Acquiring a controlling interest will allow SPE to consolidate Maa TV and is expected to increase SPE’s EBIT by over $20MM
per year by FYE17
Cash Impact
DRAFT
(a) Assumes December 31, 2012 close(b) it is our intent to not pay dividends until $10MM in working capital is achieved on the balance sheet, after which dividends will be paid on 100% of cash available
Jan-Mar Fiscal Years Ending March 31
($MMs) FYE13(a) FYE14 FYE15 FYE16 FYE17 TotalEBIT before Purchase Price Amort 2.3 13.8 19.4 28.0 32.2 95.7Less: Purchase Price Amortization (4.0) (15.4) (13.1) (11.2) (9.1) (52.9)Incremental Annual EBIT to SPE (1.7) (1.6) 6.3 16.8 23.0 42.8
Cumulative EBIT to SPE (1.7) (3.2) 3.0 19.8 42.8
Jan-Mar Fiscal Years Ending March 31
($MMs) FYE13(a) FYE14 FYE15 FYE16 FYE17 TotalCash Flow Before Dividends (0.3) 1.9 7.4 13.2 16.9 39.1
Minority Dividends(b) 0.0 0.0 0.0 6.3 8.0 14.3Cash Flow to SPE after Minority Dividends (0.3) 1.9 7.4 6.9 8.8 24.8Less: Purchase Price (107.4) (3.6) (111.0)
Net Cash Flow to SPE (107.7) 1.9 3.8 6.9 8.8 (86.3)
Cumulative Cash Flow to SPE (107.7) (105.8) (102.0) (95.1) (86.3)
5
Regulatory Approvals
• This transaction is subject to regulatory approval by three different bodies
– Foreign Investment Promotion Board (FIPB)– Reserve Bank of India (RBI)
– Ministry of Information and Broadcasting (MIB)
• Timing on regulatory approval is uncertain, but could be as little as 2 to 3 months after signing, and although unlikely, as late as 1 year after signature
• We will need an additional FIPB approval for 1.3% stake in FYE15
• SPE purchase of 1.3% stake will be conditioned on receiving FIPB approval
DRAFT
6
Risk and MitigationDRAFT
Risk Mitigation
Downturn in Indian advertising marketMSM’s expanded footprint and premier client list insulates against this better than Maa TV or MSM stand-alone
Channel growth slower than expected
Key performance drivers relate to improving the programming, advertising sales, and channels distribution, which are areas of expertise of MSM management
Difficulties integrating with MSM leads to operational disruptions
MSM proposes to keep existing Management in place and only slowly integrate Operations with the exception of distribution
Evolving regulatory framework may reduce advertising minutes
MSM management does not feel that the recent recommendations by the TRAI will be enforced
SPE will need to receive FIPB approval to exercise our call option after year 5
We know of no specific reason why the FIPB would not approve the buy-up
Next Steps
7
• Seek approval from the Group Executive Committee
• Complete and execute long form documents
• Submit filings and obtain regulatory approvals
• Close
DRAFT