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Indian billionaire Mukesh Ambani has signed a binding agreement with Walt Disney Co. to form an $8.5 billion media giant through a merger of their operations in the country, securing a dominant position in one of the world’s fastest-growing entertainment markets.

Ambani’s oil-to-telecoms conglomerate Reliance Industries Ltd. will control over 60% of the new unit — 16% directly and 47% via the Viacom18 Media Pvt. Ltd. business it largely owns — while 37% goes to Disney, said a joint statement issued late Wednesday by the companies.

Reliance will invest another 115 billion rupees ($1.4 billion) in the new unit as growth capital and Disney may contribute certain additional assets after getting regulatory approvals. The joint venture, which creates the largest player in the local broadcasting and digital sector, will get exclusive rights to distribute Disney films and productions in India, along with a license to more than 30,000 Disney content assets.

The binding pact, which Bloomberg reported on Feb. 25 had been signed, secures Reliance’s position in Asia’s biggest entertainment market, especially after a rival merger between Japan’s Sony Group Corp. and Zee Entertainment Enterprises Ltd. collapsed last month. Disney had initially pursued a far higher valuation for its India arm in merger talks, and the final deal reflects Ambani’s clout in a landscape that the American giant struggled to navigate on its own. 

“The overall value reflects a significant reduction in Disney’s valuation,” that was estimated to be as much as $17 billion when Disney purchased 21st Century Fox in 2019, Pulkit Chawla, a sector analyst with Emkay Global Financial Services Ltd. wrote in a report Thursday. “The deal, however, would hurt other industry players like Zee, as they would have to compete with a much larger entity.”

Reliance shares rose as much as 1.6% in Mumbai during trading, the most in two weeks, while Zee slipped as much as 2.9%. Other local media stocks were fell on Thursday.

Read More: Reliance Rises as Disney Deal Creates Media Giant: Street Wrap

Intense competition and fragmented viewing habits — demand for regional language content, for example — has made it challenging for foreign streaming platforms like Netflix Inc. and Amazon.com Inc’s Prime Video to see the success they’ve had in other markets. 

Streaming Potential

The deal is a massive boost for Reliance’s streaming platform, Jio Cinema, as it can now offer Disney-Star India’s content library alongside its traditional sports broadcasting lineup. 

Reliance and Disney have been rivals, with the Indian company outbidding the American one in 2022 for rights to the Indian Premier League, the $6.2 billion cricket juggernaut. Viacom18 Media also managed to grab multi-year rights to Warner Bros Discovery Inc.’s HBO shows like Succession, House of the Dragon and The Last of Us among others last year, which had earlier been with Disney in India.

Nita Ambani will serve as the chairperson of the joint venture and Uday Shankar is slated to be the vice chairperson, said the statement. 

The merger “can result in meaningful cost savings and improve Disney’s bottom line,” Geetha Ranganathan, a Bloomberg Intelligence analyst wrote in a Dec. 12 note. 

--With assistance from Baiju Kalesh and Alex Gabriel Simon.

(Updates with analyst comment in the fifth paragraph.)

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