As part of the transaction, the India and overseas operations of Reliance Mediaworks’ film and media services business will be combined with Prime Focus Ltd through a slump sale. For this, it will be paid through a preferential allotment of 67.31 million Prime Focus shares (67,307,692 shares) at Rs 52 per share for a total consideration of Rs 350 crore.
Reliance Mediaworks and Prime Focus promoters Naresh and Namit Malhotra will also invest Rs 120 crore each into Prime Focus through a preferred allotment at Rs 52 per share.
Post this transaction, Reliance Mediaworks promoters will own 30.2% stake in the company on a fully diluted basis, while Prime Focus promoters will own 33.5% stake on a fully diluted basis. Namit Malhotra will head the combined entity as its Executive Chairman and Group CEO.
It’s worth noting that Reliance Mediaworks was delisted earlier this year, after receiving the board approval in January this year which was later cleared by its shareholders.
Prime Focus promoters and Reliance Mediaworks have also launched (pdf) a open offer to acquire up to 26% stake in Prime Focus at Rs 52 per share, in compliance with SEBI rules and regulations.
Through this offer, they are looking to acquire 77.71 million shares (77,708,534 shares) at Rs 52 each for a total consideration of Rs 404.1 crore. The acquisition is being made by Reliance Mediaworks along with Reliance Land Private Limited, Prime Focus promoters Naresh and Namit Malhotra and Monsoon Studio Private Limited (wholly owned by Naresh & Namit Malhotra).
The current market price of Prime Focus is Rs 49.90, up Rs 0.35 from yesterday’s close. This is 4% lower than the offer price.
Using proceeds to fund Double Negative merger
Prime Focus plans to use proceeds from this transaction to fund the recent merger of its creative services subsidiary Prime Focus World with the VFX house Double Negative, which is expected to close in coming weeks.
The company claims that the combination of Reliance Mediaworks, Prime Focus and Double Negative will create the world’s largest and most integrated media services group offering visual effects, stereo 3D conversion, animation, and cloud-based digital media solutions for film, advertising and television industries.
Prime Focus also notes that the combination of Reliance Mediaworks and Prime Focus will provide integrated services to the Bollywood industry, right from equipment rental and shooting stages up to final digital distribution. ￼￼
The combined group will also apparently have the world’s first hybrid cloud-enabled Media ERP platform which will apparently help broadcasters, studios, brands, sports and digital businesses manage their content businesses.
Besides this, Prime Focus will gain 100% ownership of the Los Angeles-based digital film restoration firm Lowry Digital and 30% stake in the Hollywood VFX house Digital Domain, which were previously owned by Reliance Mediaworks. It will also secure a total of one million sq. ft. of facilities including studio facilities in Film City, Mumbai.
Earlier in April, Prime Focus’s technology subsidiary Prime Focus Technologies (PFT) had also acquired California-based DAX for a base consideration of $9.1 million (around Rs 56 crore) payable over three years.
Post acquisition, Prime Focus had combined its cloud-enabled media ERP solution CLEAR with DAX’s technology and products including its television production solution Digital Dailies to offer enterprise media ERP solutions to broadcasters and studios.