In one of the largest investment deals in the media sector, global private equity firm Blackstone Capital has acquired around a 26 per cent stake in Ushodaya Enterprises Ltd (UEL), the holding company that runs Andhra Pradesh's Eenadu group, for $275 million. It also gets a seat on its board.
The transaction values the Hyderabad-based company that publishes the leading Telugu daily Eenadu and a television network of the same name at around $1.1 billion, highly placed sources close to the deal said. In addition, UEL will raise $190 million in bank finances to raise a total of $465 million in cash.
Industry sources said that a substantial part of the funds would be used to repay debt of group companies of Chairman Ramoji Rao's UEL, which plunged into a liquidity crunch after the Reserve Bank of India intervened to ensure the repayment of the deposits of small investors in its chit fund business.
To meet the RBI’s diktat, the group borrowed from banks and also used internal accruals to repay matured deposits of small investors, the sources said.
Besides a newspaper group and a television broadcast firm, Ushodaya runs a flourishing real estate business and the Ramoji Rao Film City that makes money from movie production facilities and guided tours that showcase film-making.
The real estate and Film City have also helped drive up valuations, the sources said. Rao said in a statement that an intial public offer was an option, but Blackstone's media strength and the current stage of growth made him prefer private equity.
"We believe that the Indian media sector will be a key beneficiary of a secular trend in growth in personal consumption that is driving India’s economic expansion which in turn will spur advertising growth," said Akhil Gupta, chairman and managing Director of Blackstone Advisors India Private Ltd.
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