Chandra: Looking ahead

Mumbai, March 29: Zee Telefilms has decided to demerge its news and cable businesses into separate entities.

The board has decided to transfer the news business to Zee News Limited (ZNL). The cable business of the company and that of Siti Cable Network, a wholly-owned subsidiary of the company, will be transferred to Wire & Wireless (India) Ltd.

The demerger scheme will leave Zee Telefims as a focussed producer of TV programming, movies and music.

The scheme of arrangement has been approved by the board and March 31, 2006 has been fixed as the appointed date for the same.

Investors will get 137 equity shares of ZNL for every 100 equity shares held in Zee Telefilms.

If on the record date, foreign institutional investors (FIIs) hold more than 32 per cent shares of the company, then those FIIs who hold more than 0.5 per cent stake will be given preference shares for such excess holding. They will be allotted 1781 preference shares for every 100 equity shares held.

In Wire & Wireless Limited, investors will get one fully paid up share for every two equity shares held in Zee Telefims.

However, Zee Telefilms, the only shareholder of Siti Cable, will be allotted one preference share for every 1,000 equity shares held by Siti Cable in Wire & Wireless Limited. They will also be given one preference share for every 1000 preference shares held in Siti Cable.

Deloitte Haskins & Sells had been appointed to work out the valuation and the share exchange ratios for the demerger.

They have also been appointed to evaluate and analyse the implications of restructuring the direct consumer services business of the company.

The board has given an in-principle approval to demerge the consumer services business, which, when approved, would create a fourth listed company.

According to Zee, the restructuring is expected to unlock value for the company's shareholders and will also enable Zee Telefilms to have a sharper focus on each of these operations. The demerger scheme is subject to necessary approvals.

According to the third quarter results of Zee Telefilms, the content and broadcasting segment contributed 81.3 per cent of the total quarterly revenue of the company.

The access segment, which includes Siticable, Zee Turner and the distribution segment of ZTL, contributed 20.9 per cent.

The film production and distribution segment and the education division made negligible contribution.

The Zee board has also approved the allotment of 1,11,237 equity shares each on conversion of 50 foreign currency convertible bonds (FCCBs), according to the terms of the issue.