Disney Eyes Bollywood Expansion

In a bid to gain further traction in the Indian market, The Walt Disney Company (DIS - Analyst Report) is set to acquire a controlling interest in UTV Software Communications Ltd. (UTV). 

One of the largest entertainment companies in the world is expected to enhance its presence in India through this deal. The strategic move on the company’s part will also enhance its position compared to its peers with respect to movie offerings. The company currently owns three leading children's television networks - Disney Channel, Disney XD and Hungama, which are performing well in the market.

UTV is one of the leading producers and distributors of cinema and television programs in the rapidly growing Indian entertainment industry. UTV operates in five verticals, including Broadcasting, Motion Pictures, Interactive, Games Content and TV Content. Post acquisition, Disney would become India’s leading broadcasters catering to more than 100 million viewers weekly.

Through the acquisition, Disney will also gain access to "Bollywood" and other programs including gaming. The company will operate both UTV as well as Disney brands in India.

Although the financial terms of the deal remained undisclosed, UTV and Disney are progressing well on its integration process. Disney has started the process of delisting the shares of UTV from Indian bourses. In addition, the CEO of UTV, Mr. Screwvala will head the Indian operations as a managing director of Disney. Screwvala has a track record of successfully delivering content rich programs to the viewers.

Disney is expanding its global footprints in the developing markets such as India, Russia and China. The acquisition of UTV is a step forward in its expansion process with a strong boost in Indian operations. In Russia, Disney will begin broadcasting a free-to-air channel this year following its acquisition of 49% stake in the Russian media group UTH.

Further, the company started building its Shanghai Disney Resort, including Shanghai Disneyland, two themed hotels, and retail dining and entertainment venue, to drive growth in China.

We believe Disney is pursuing the same trend as its major rivals including Time Warner Cable (TWC - Analyst Report), Viacom Inc. (VIA - Snapshot Report) and Sony Corporation (SNE - Snapshot Report) that are looking to strengthen their position in India. 

We are maintaining our long-term Neutral recommendation on Disney. For the short term (1-3 months), the stock retains a Zacks #3 (Hold) Rank.

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