Disney Star's $2 billion risk: Fallout from Sony-Zee merger dispute

Amid the recent fallout of the proposed Sony-Zee merger, Disney Star is facing potential valuation woes that could result in a staggering $2 billion hit, according to sources reported by The Economic Times.

The controversy stems from Zee Entertainment Enterprises (ZEEL) disputing a $1.5-billion sub-licensing deal for the International Cricket Council (ICC). ZEEL contends that its obligations to honor the ICC deal with Disney Star were tied to the successful completion of the Zee-Sony merger, a claim that Disney Star vehemently disputes.

Reliance Industries (RIL), closely monitoring the Sony-Zee merger, has prepared two valuation scenarios for Disney Star. One scenario factors in the ICC TV rights obligations, and the other does not. The potential downgrade of up to $2 billion hangs in the balance, contingent on Disney Star servicing the ICC TV deal alongside digital rights.

Despite uncertainties, Disney Star has confirmed its coverage of the ICC U19 Men's Cricket World Cup 2024 on Star Sports and Disney+ Hotstar. The company has incorporated the ICC television rights deal into its tariffs, raising the bouquet price by approximately 10%, even after losing the Board of Control for Cricket in India (BCCI) media rights.

In the aftermath of the Sony-Zee fallout, reports suggest that Reliance and Walt Disney have signed a non-binding term sheet to merge Viacom18 and Disney Star. If the deal materializes, it could create a media powerhouse with combined revenues of around ₹25,000 crore.

The Zee stock witnessed a significant 33% decline on the BSE after Sony Corp decided to call off the proposed merger with Zee. Industry insiders speculate that Disney Star could incur losses exceeding $1.5 billion from the ICC deal, considering the substantial gap between winning bids and rival offers.

As the situation unfolds, the media industry closely watches the interplay of mergers and contractual disputes, shaping the future of Disney Star's valuation in the dynamic Indian media landscape.

Also Watch: Zee shares tank more than 25% as Sony terminates $10 billion merger over unmet conditions