The board meeting that Balaji Telefilms will be holding tomorrow on whether to go through with a merger with HFCL Nine Broadcasting will be nothing more than a formality, if industry sources are to be believed.

According to the industry grapevine, the decision has already been taken that there will be no merger between the two companies.

Balaji CEO Sanjay Dosi, queried about the rumours doing the rounds that the deal was off, declined to comment on the issue and said an official statement would be made available after tomorrow‘s board meeting.

Balaji, in a notice to the National Stock Exchange last week and the Bombay Stock Exchange yesterday, had said the meeting was being convened to consider a review of the proposed merger of Nine Network Entertainment India (a wholly owned subsidiary of HFCL Nine) with the company.

HFCL (Himachal Futuristic Communication Ltd) Nine Broadcasting is a 51:49 per cent holding company held by Vinay Maloo and Australian media magnate Kerry Packer. HFCL Nine was to take a 20 per cent stake in Balaji Telefilms.

The markets were also buzzing with the rumours. The Balaji scrip closed at Rs 144.90 after it hit the 8 per cent upper limit of the circuit breaker for the second straight day. It opened at RS 133.50.

The market sentiment is that the merger is likely to be called off and this would be good for the company because a merger would have entailed earnings dilution.

Balaji board to meet on merger with HFCL Nine tomorrow

After a long while, a court in the UK has provided some good news for media baron Subhash Chandra.

The Chandra promoted company Afro Asian Satellite Communications Gibraltar (AASCG) Ltd has won a five-year-long legal battle against Hughes Space and Communications International over a cancelled satellite contract.

The London Court of International Arbitration, in a ruling on 11 April, ordered Hughes to pay $38 million to AASCG plus up to $20 million in interest as well as court costs, the figure to be decided at a future date, the 30 April issue of Space News has reported.

Hughes Space and Communications International is part of Hughes Electronics Corporation‘s satellite manufacturing arm, which was sold to Seattle-based Boeing Co last year.

AASCG and Hughes signed a $700-million contract in January 1995 for two large mobile-telephone satellites that AASCG was planning as part of its Agrani project. AASCG made an initial payment of $38 million to Hughes as part of the contract. But in late 1996, Hughes stopped work on Agrani, saying that the project‘s backers were unable to finance further work.

But AASCG argued that Hughes stopped work on Agrani because of its greater interest in a contract with the Asia-Pacific Mobile Telecommunications (APMT) consortium of Singapore, a Chinese-backed concern that was planning a similar satellite system over East Asia.

For the US satellite maker, the AASCG-APMT episode has proved a costly one. In addition to losing the AASCG contract and being forced to reimburse the company with interest, Hughes was barred by the US government from shipping the APMT satellite due to technology transfer concerns. Hughes subsequently paid APMT a contract cancellation fee.

Balaji Telefilms has called a meeting tomorrow of its board of directors on the future of its strategic tie-up with HFCL Nine Broadcasting.

Balaji, in a notice to the National Stock Exchange last week and the Bombay Stock Exchange yesterday, said the meeting was being convened to consider a review of the proposed merger of Nine Network Entertainment India with the company.

HFCL (Himachal Futuristic Communication Ltd) Nine Broadcasting is a 51:49 per cent holding company held by Vinay Maloo and Australian media magnate Kerry Packer. HFCL Nine was to take a 20 per cent stake in Balaji Telefilms.

Balaji‘s decision has been influenced by the "K factor" and the uncertainties surrounding HFCL Nine‘s three-hour prime time slot on DD Metro. Balaji creative director Ekta Kapoor‘s strong belief in the letter K as a good luck talisman for all Balaji projects somehow doesn‘t seem to extend to HFCL, one of the currently infamous K-10 scrips. These were the scrips favoured by cornered bull operator Ketan Parekh. It is another matter that Parekh‘s investment firms have a 4.5 per cent stake in Balaji.

Parekh is in the custody of the Central Bureau of Investigation but that doesn‘t seem to have prevented the HFCL scrip witnessing an abnormal upsurge in the last few days.

HFCL Nine paid Rs 1,210 million last year for a three hour prime time slot on DD Metro. It has been lobbying for a long-term contract for its DD Metro slot ranging between five and 10 years with a revenue-sharing clause. This hasn‘t been accepted and instead HFCL Nine has been offered the option of extending its contract by six months, ending March 2002 or by another 18 months, up to March 2003.

The matter is at a stalemate at present and the uncertainty surrounding the deal has only added to the doubts within Balaji about the merger.

The deal between the two parties, announced last November, involved a swap ratio where 65 shares of Balaji would be swapped for 200 shares of HFCL Nine.

Balaji Telefilms was to acquire Nine Entertainment India, a wholly-owned subsidiary of Nine Broadcasting India, for Rs 340 million. Post-acquisition, HFCL Nine was to hold 20 per cent equity in Balaji Telefilms.