Blackstone to ditch Eenadu
Blackstone, the world’s largest leveraged buyout firm, is close to scrapping its PE deal for Hyderabad-based media group Ushodaya Enterprises, owners of Telugu publication Eenadu, according to sources familiar with the situation.
“This could pose fresh challenge for Ramoji Rao to garner much needed capital for his group”
The PE giant had recently reduced the size of its original $275-million deal for picking a 26% stake in Ushodaya, announced in January 2007, as it was not receiving the mandatory clearance from the Foreign Investment Promotion Board (FIPB) and the Cabinet Committee of Economic Affairs (CCEA).
Blackstone had subsequently reduced the size of the proposed deal and under the revised terms, it was looking to acquire a 14% stake for Rs 590 crore or a little less than $150 million in Ushodaya Enterprises.
As per the process followed by the Indian government, the proposed investment by Blackstone now awaits final clearance from the finance minister, which is usually just a formality after the FIPB gives its green signal. Sources say despite the imminent clearance, Blackstone is likely to pull out of the transaction. It is learnt that senior executives of Blackstone are expected to meet with the management of Ushodaya Enterprises, which is led by Ramoji Rao, on Wednesday to communicate their decision.
“Blackstone is also having a rethink on the deal as the media business environment in the region where Ushodaya is dominant has changed over the last one year and is going to significantly impact the margins of Eenadu. Besides the new publication, Eenadu’s television venture is also expected to see margin erosion due to increasing competition. The new business climate does not justify the aggressive valuations as proposed one year ago,” said one source. “With Blackstone deciding to pull out it would be interesting to see whether any other foreign PE fund is willing to invest in Ushodaya at all, given the political ramifications. This could pose fresh challenge for Ramoji Rao to garner much needed capital for his group,” the source added.
Source : The Economic Times
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