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Zee Telefilms unveils share allotment plan on demergernews
Our Corporate Bureau
13 December 2006

Zee Telefilms Ltd (ZTL) has clarified the modalities of the restructuring of its news business and cable business for the benefit of its shareholders.

Subhash Chandra, chairman, stated, "In keeping with its philosophy of building long term shareholder value, the board of Zee had decided to restructure the various businesses. This would strengthen long term business prospects of each individual business, by providing focused management attention. From December 18, the company would start trading as the demerged entity (to be renamed Zee Entertainment Enterprises Ltd) and two new companies would start their journey as independently listed entities. Though the business of both Wire & Wireless India Ltd (WWIL) and Zee News Ltd (ZNL) was earlier part of the company, they would be able to unlock greater shareholder value as independent companies."

Zee Telefilms scheme of demerger

The scheme of arrangement had proposed demerging assets and liabilities of the following businesses:

  • Cable distribution undertaking;
  • News and regional broadcasting undertaking;
  • Direct consumer business undertaking.

The date for the demerger is March 31, 2006, for the cable undertaking and the news and regional undertaking, while for the direct consumer business, the appointed date is April 1, 2006.

The company has already received approval of its demerger scheme by the Bombay High Court for the demerger of the cable undertaking and news and regional undertaking. The process of getting approval for the demerger of direct consumer undertaking is underway and is expected soon.

New business units
After the businesses are hived-off into individual companies, shareholders of Zee will get shares in the four separate companies, which will be independently listed on stock exchanges. They are:

Zee Telefilms Ltd (to be renamed Zee Entertainment Enterprises Ltd [ZEEL]), with 900 employees and revenues of Rs 1,050 crore in FY2006

  • ZEEL includes the global broadcasting business of the company, excluding the news and regional language channels;
  • The channels in ZEEL include Zee TV, Zee Cinema, Zee Sports, Zee Music, Zee Smile, Zee Jagran, Zee Premiere, Zee Classic, Zee Action, Zee Studio, Zee Cafe and Zee Trendz;
  • ZEEL includes the international broadcasting business of Zee in USA, Europe, Africa, Middle East and in Asia Pacific;
  • It includes investments in Zee Turner India Ltd, ETC Networks Ltd and Ten Sports channel.

Zee News Ltd (ZNL), with over 900 employees, accounted for revenues of Rs 200 crore in FY 2006

  • ZNL includes the broadcasting business of Zee Telefilms Ltd for the news and regional language channels;
  • The channels in ZNL include Zee News, Zee Business, Zee Marathi, Zee Bangla, Zee Punjabi, Zee Gujarati, Zee Telugu, Zee Kannada and 24 Ghante;
  • It also supplies content to the international broadcasting business of Zee in USA, Europe, Africa, Middle East and in Asia Pacific.

Wire and Wireless India Ltd (WWIL) accounted for revenues of Rs 150 crore in FY 2006. Revenues of WWIL are expected to grow rapidly in the coming years due to digitisation of cable and acquisition of last-mile connectivity

  • WWIL includes the cable distribution business of Zee Telefilms, which was earlier under Siticable Network Ltd. WWIL is the largest multi-system operator (MSO) in the country and has a connectivity of 6.7 million homes.
  • WWIL operates 52 headends in 35 cities across the country. It has seven regional offices and over 500 employees.
  • WWIL is embarking on a project of converting the analogue cable homes in India to digital cable. It plans to expand from current 35 cities to 66 cities in the next two years.

ASC Enterprises Ltd, to be renamed Dish TV India Ltd, accounted for revenues of Rs80 crore in FY 2006 and has over 800 employees.

  • Dish includes the direct to home satellite broadcasting business, which was the first DTH operator in India and currently the largest with 1.6 million subscribers.
  • Dish has revolutionized television viewing in India through its high quality digital service delivered directly to consumers' homes. It provides 160 digital channels and also offers many value added services to its consumers like electronic programme guide, parental lock facility, ability to record programmes, gaming channels, movies on demand, etc. It is expected to face competition from TataSky and MTNL's IPTV services

Share swap: According to a communiqué to the stock exchanges, the company said that after the demerger shareholder with 100 shares in Zee Telefilms on the record date would receive:

  • 100 shares in ZEEL along with
  • 137 shares in demerged ZNL. Subsequently, ZNL would reduce its share capital by 67 per cent and therefore, 100 shares in Zee Telefilms would translate into net 45 shares in ZNL, implying effective shareholding of 80 per cent
  • 50 shares in demerged WWIL, implying effective shareholding of 100 per cent
  • 230 shares in demerged ASC Enterprises Ltd (Dish). Subsequently, Dish would reduce its share capital by 75 per cent, which implies that 100 share of Zee Telefilms would translate into net 57 shares in Dish, implying effective shareholding of 57 per cent.

What shareholders get
Shareholders in the demerged company would continue to hold the same number of shares as they currently hold in Zee Telefilms.

In addition to that, they would receive separate shares in three demerged entities, which will allow them to participate individually as well as collectively in the growth area of cable distribution, direct-to-home broadcasting, and news and regional channels.

The shares of the resulting companies will be listed on the stock exchanges in India, where Zee's shares are currently listed, thus providing liquidity to all shareholders.

Highlights:

  • The appointed date for the demerger is March 31, 2006 and the scheme has become effective on November 22, 2006.
  • Zee Telefilms had earlier announced the book closure date (from 24 December to 28 December, 2006) for determining eligibility for issuance of equity shares (consequent to the scheme of arrangement) by ZNL and WWIL.
  • Shareholders of the company would receive 45 shares of ZNL and 50 shares of WWIL for every 100 shares held in the company.
  • Both companies would be listed independently, after relevant approvals from the stock exchange. Listing is likely in January 2007.
  • Demerged ZTL (including the direct consumer business undertaking) would continue to trade on the stock exchanges.
  • A separate record date would be announced for the demerger of direct consumer business of ZTL into ASC Enterprises Ltd, to be renamed Dish TV India Ltd (Dish).
also see : Zee Tele three-way demerger on 18 December, 2006

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Zee Telefilms unveils share allotment plan on demerger