- Wealth PMS
An interesting story on the Reliance takeover of Network 18 by Ashish Mishra at Mint.
“I am quitting,” Bahl said. “Reliance wants to take over.” The words hung over the meeting; silence reigned for a while. “Why?” someone asked. “They want to take over,” replied Bahl. “They are completely within their rights to do it. So I have decided to move on. They made an offer that I could continue as a minority shareholder, but I have decided to exit.”
Two days later, Reliance Industries Ltd (RIL) announced that it would spend Rs.4,000 crore to take complete control of Network18, the company Bahl founded in 1993, in the biggest takeover in India’s media industry and followed it up with an open offer to the public.
The mail has details of how things panned out. In the next few days, top execs quit, including the CEO, CFO and some board members. Bahl was losing what he took 21 years to build, and he was leaving.
But it wasn’t that he was just leaving and was all surprised by RIL’s behaviour. It had to be well known, and a well timed exit. Bahl had, in 2012, all but sold his company to RIL, in a deal that ensured his ownership could go to zero any time that RIL wished. And all that, to get money in order to buy something from RIL – which effectively meant that RIL was paying itself and getting all of Network 18 in the process.
Now, all that RIL did was exercise its rights. It had bought Network 18, effectively, in 2012, and now it was saying, “I’m actually taking over”.
The post talks about how Bahl was “desperate” when he went to Reliance. The group had around Rs. 1800 cr. of debt and they would retire it through the Reliance purchase (which was in total around 4,000 cr. at that time). If you think about it – around 2,200 cr. to buy ETV from Reliance and another 1800 cr. to clear out debt – that’s all the money was spent for.
Effectively, Bahl sold out, for nothing? Because in the end, all that changed was that his shareholding went to zero, and the company went to zero-debt. Why would he do that?
I think the answer was that eventually, Bahl would be paid when RIL actually acquired the shares which has now happened in 2014. And he has been paid, now. The exact amount isn’t entirely clear but there has been money paid.
I’m fairly sure Bahl knew this would happen, regardless of whether Network18 turned around. It was inevitable, and he had two years more than other people would give to enjoy being at the helm of affairs.
Interesingly they mention how Reliance wanted the media to shut-up about Kejriwal.
[Manoj Modi is a big-swinging-top-guy at Reliance]
“Modi was furious. He was like—‘tum humko dacoit bulate ho, tum chilla rahe ho ki hum crony capitalist hai. Agar aisa tha to dacoit se paise mangne kyon aye the? Tum kaun se doodh ke dhule ho?’ (You are calling us a dacoit, you are shouting that we are crony capitalists. If that is so, then why did you come to us for money in the first place? Do you think you have a clean record?),” says the official.
Oh but really, this can’t be a cause to cry about. Media companies created the concept of paid news. Now it’s coming back to bite them! I’m not saying that Network18 had paid news, because I don’t have evidence that it did – but in general when the media as an industry doesn’t rally against a practice of keeping business and content tightly linked, then one day this practice will extract its pound of flesh.