Summary
The Walt Disney Company (DIS) announced a significant strategic move on February 28, 2024, with the signing of binding agreements to form a joint venture (JV) combining its Star India subsidiary with Reliance Industries Limited (RIL) and Viacom18 Media Private Limited. This transaction is expected to result in substantial non-cash pre-tax impairment charges estimated between $1.8 billion and $2.4 billion. Approximately half of these charges stem from adjusting Star India's net assets to fair value under held-for-sale accounting, with the remainder reflecting a write-down of goodwill associated with entertainment linear networks due to Star India's removal. The JV, which will be controlled by RIL, will see RIL invest approximately $1.4 billion at closing. Disney is expected to hold a 37% stake, RIL approximately 16%, and Viacom18 47%. The transaction values the JV at approximately $8.5 billion post-money, excluding synergies. While Disney does not anticipate the transaction closing in fiscal 2024, it is expected in the first half of fiscal 2025. Importantly, these impairment charges are anticipated to be excluded from Adjusted EPS, meaning they are not expected to impact Disney's previously issued guidance for fiscal 2024 Adjusted EPS.
Key Highlights
- 1Disney is forming a joint venture by combining its Star India business with Reliance Industries Limited (RIL) and Viacom18.
- 2The JV is expected to result in non-cash pre-tax impairment charges of $1.8 billion to $2.4 billion.
- 3The impairment charges are primarily due to Star India being classified as 'held-for-sale' and a goodwill write-down related to entertainment linear networks.
- 4RIL will invest approximately $1.4 billion at closing and will control the JV.
- 5Disney is expected to hold a 37% stake in the new JV.
- 6The transaction values the JV at approximately $8.5 billion (post-money, excluding synergies).
- 7The closing of the transaction is not expected in fiscal 2024, with an anticipated closure in the first half of fiscal 2025.