Rel Big, Soros deal stuck over valuation

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Rel Big, Soros deal stuck over valuation
18 Aug, 2008, 0730 hrs IST,Sonali Krishna, ET Bureau

MUMBAI: Reliance Big Entertainment, which earlier this year announced that global investor George Soros will [COLOR=blue! important][COLOR=blue! important]invest[/color][/color] $100 million for a 3% stake in the company, is yet to close the deal. While the term-sheet for the proposed transaction, which offers an exit option to the Soros fund, was signed in March, differences in valuation along with a few other issues are holding back the investment.

While the deal has certainly not fallen through, sources said Soros would like further clarity on certain issues before signing the cheque. According to three industry officials familiar with the situation, there has not been much progress on the deal after signing the term-deal.

“While it is possible that the deal may finally go through, the George Soros team is yet to take the final call,” said a person familiar with the situation.

A Reliance spokesperson said: “We do not comment on market speculation.” Sam Gupta, managing director, QIF (the fund that handles Mr Soros’ investment), said: “We do not comment on our investment activities.”

But, a source close to the Soros team revealed that the deal is primarily stuck due to valuation issues and other conditions like a board berth. It is learnt that the team had also insisted on a put option as part of the exit clause in the term-sheet.

However, two senior Reliance ADA Group (R-ADAG ) officials, who requested anonymity, insisted that the deal was very much on course.

“There are no issues whatsoever. The transaction is very much on track,” said an official. The outcome of the Soros deal is unlikely to have any impact on a bigger venture that Reliance Big Entertainment is currently focusing on. The company is understood to be giving final touches to its proposed deal with Steven Spielberg.

According to the deal, which is believed to be on track, R-ADAG will invest $500 million in Dream-Works’ new productions and another $500 million in debt through JP Morgan Chase. The new studio, which will retain the name DreamWorks, may make up to 10 movies a year, depending on the cash inflow.

Soros may rope in foreign investors for Rel Big deal

AS far as the Soros deal is concerned, besides the valuation and other technicalities, there is a possibility that Soros team was not happy with the media reports in February, which said the deal was almost sealed.

“It was slightly premature for RADAG to announce the investment,” said a person close to the Soros team. It is also significant that the valuation mentioned in the reports (quoting ADAG officials) is believed to be different from what has been agreed on in the term sheet.

The team is currently doing its due diligence before taking the final decision. However, it is also possible that Soros may rope in other foreign investors, who have shown interest in the company. Some people believe that this could have also resulted in protracted negotiations.

A few months ago, Reliance Big Entertainment was reportedly in talks with US private equity fund Kohlberg Kravis Roberts (KKR), billionaire Carl Icahn, Japan’s Softbank and Abu Dhabi Investment Authority for divesting 10% equity.

Source: Rel Big, Soros deal stuck over valuation- Entertainment-Media / Entertainment -News By Industry-News-The Economic Times
 

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