Share price of Eros International jumped 10 percent in morning trade on April 20 after the company announced an all-share merger with Hollywood's STX Entertainment to create an equally-held global entertainment company.
The six-year-old, privately-held STX has done 34 movies including 'Hustlers' and 'Bad Moms' which have cumulatively grossed $1.5 billion, while Eros focuses primarily on the Indian and diaspora markets by producing movies and distributing through an OTT platform.
"The deal, which comes at a time the entire movie production sector is shut in major global markets due to the COVID-19 pandemic, will see STX merging into the NYSE-listed Eros International (which is also the holding company of the Lullas-promoted Eros Group) and creating an enterprise with a $1 billion valuation", said Pradeep Dwivedi, the chief executive for Eros International Media.
Existing shareholders of Eros and STX will each hold about 42 percent of the merged entity each, while the remaining 15-odd percent will be with new shareholders, he said, adding that fresh capital of $125 million is being raised from STX's existing investors, including TPG, Hony Capital and Liberty Global.
Dwivedi said a merger between the two companies will bring together talent from Bollywood and Hollywood, resulting in collaboration on projects and jointly accessing the mega market of China. "While Bollywood has the scale, financially speaking, we have some way to go and to learn from Hollywood. This merger will help in that," Dwivedi, who will continue in the same role post-merger, said.
Apart from market access, the merger will also give the company additional heft from finance perspective, he said, adding the revamped capital base has led JP Morgan to open a $350 million credit facility.
The stock price surged 91 percent in the last 15 days and it upper circuit. It was quoting at Rs 16.35, up Rs 1.48, or 9.95 percent. It has touched an intraday high of Rs 16.35 and an intraday low of Rs 16.35. There were pending buy orders of 242,988 shares, with no sellers available.