Reliance Industries Limited (NSEI:RELIANCE) (RIL) and The Walt Disney Company (NYSE:DIS) are finalising details of a non-binding term sheet to move ahead with plans to merge their India media and entertainment operations, said executives involved in the matter. The deal is likely to give the Mukesh Ambani-led group a controlling stake in what will become the country's largest media and entertainment business if the deal goes through. The plan, as of now, is to create a step-down subsidiary of RIL's Viacom18, which will absorb Star India via a stock swap, said the people cited above.

Reliance is pitching to be the larger shareholder with at least 51% in the merged company with Disney owning the residual 49%, they said. Both businesses are being treated as similar-sized ones, so RIL is likely to pay cash for the controlling stake. The two sides are also negotiating a business plan to inject cash as immediate capital investment, expected to be $1 billion -1.5 billion.

The final shareholding structure of the entity will get crystallised and its value established based on the cash infusion from each of the parties. The board is expected to have equal representation from Reliance and Disney of at least two directors each. Uday Shankar-led Bodhi Tree, the second largest shareholder in Viacom18 after Reliance with a 15.97% stake, is likely to get a seat.

A minimum of two independent directors are being considered. This may change in the weeks ahead, said the people cited above. Those involved in the talks from the US company include Justin Warbrooke, Chief Financial Officer, direct-to-consumer business, and international head of business operations, and Kevin Mayer, a former Disney executive brought back in July by chief executive Bob Iger as an adviser to help him navigate the company's legacy television business and the ESPN sports network.

Another participant is K Madhavan, Disney's India head, along with The Raine Group, an advisory, said the people cited above. Warbrooke was in India recently. Manoj Modi, Ambani's key adviser, is fronting negotiations for RIL, with the group's M&A team.

The two sides are likely to have key meetings before signing the term sheet, following which both are expected to go for an accelerated timeline to announce the merger, possibly as early as end-January, said the people cited above. After the term sheet is decided and confirmatory due diligence is conducted, the valuation exercise will officially begin with independent valuers. "It's a merger not an acquisition but not with equal shareholding," said one of the persons cited above.

"Both sides will put equity instead of one buying the other out for cash. Even the junior shareholder will have rights." Reliance Industries spokesperson did not respond to ET's detailed questionnaire sent on December 11, 2023 afternoon till press time. Walt Disney India declined to comment.