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UTV Software – Disney Hikes Stake – Analysis

February 18, 2008

The Walt Disney Company Limited (Disney) has increased its stake in UTV to 32.1% through a preferential share allotment of shares (9.4m) for US$203m at Rs860.8/share. UTV promoters will be issued 4.5m warrants at Rs860.8/share. Disney and UTV will be equal partners, each with a 32.1% stake with Ronnie Screwvala retaining management control.

Induction of a technically and financially strong partner like Disney is likely to bring significant synergies and value to UTV’s existing businesses. The deal dampener, however, is the pricing, which is significantly below the market expectation. We are also surprised by the extent of funds raised, which is considerably above past requirements stated by management.

Synergies with Disney will definitely flow through, although the extent and timing remains uncertain at this point in time.

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