Anil D Ambani's Reliance Capital on Thursday said it would acquire a 51 per cent stake in Adlabs Films Ltd for around Rs 350 crore (Rs 3.5 billion).
It will make an open offer for another 20 per cent of the company at Rs 183 per share. The total cost of up to 71 per cent acquisition, made through subsidiary Reliance Land Pvt Ltd, can be around Rs 500 crore (Rs 5 billion).
RCL now holds 5.84 per cent in Adlabs, a film processing laboratory. The acquisition would be done in two stages.
It is first buying out 31.51 per cent stake from Vasanji A Manania, one of the promoters of Adlabs, at Rs 100 crore (Rs 1 billion). Another Rs 250 crore (Rs 2.5 billion) will be invested through a preferential offer, said a Reliance Capital executive.
The net profit of Adlabs was Rs 24.04 crore (Rs 240 million) for the year ended March 2005 on a revenue of Rs 100.18 crore (Rs 1 billion).
Manmohan Shetty, the other promoter of Adlabs who also holds 31.51 per cent stake, will continue as the chairman. Of the non-promoter holding, 10.71 per cent are held by institutional investors and 16.69 per cent by the public.
Private corporate bodies own 9.06 per cent of which 5.84 per cent are held by RCL.Founded in 1978 by Shetty and Mamania, Adlabs initially catered only to the ad film market but later moved on to processing documentaries and short films.
Adlabs has recently ventured into the entertainment sector through the IMAX dome theatre as well as a cinema multiplex.
According to a Reliance Capital spokesperson, "Pursuing the large opportunity to infuse capital and provide management bandwidth to promising companies as a planned strategy of growth, we are proposing to acquire Adlabs, a leading company in the entertainment sector."
"The proposed acquisition reflects our commitment to deploy our financial and management resources to maximise value for our shareholders, by actively supporting the growth of outstanding companies with a proven track record of performance," he added.
The spokesperson also said entertainment was not the only area of interest for the Anil Ambani group companies. "We will look for synergy with the Reliance Infocomm's activities," he added.
Reliance Infocomm is to roll out its broadband initiative in the next 12-24 months in the country and was looking for partners for digital distribution of the content. Under the initiative, Reliance would roll out a whole range of entertainment options.
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