India's UFO, Qube to merge, ICICI to invest
UFO Moviez, an Indian digital broadcaster with several PE backers, will merge with domestic peer Qube Cinema Technologies, with support from ICICI Venture.
Both UFO and Qube operate satellite-based digital networks that deliver entertainment content and advertising to cinemas in India. According to a filing, Qube de-merge most of its operations – excluding business that have limited growth potential or will not integrate well with UFO – into its subsidiary Qube Digital Cinema. Qube Digital will then merge with Qube subsidiary Moviebuff.
Following the merger, Qube Digital will issue new shares to shareholders of Qube and Moviebuff, after which UFO and ICICI will acquire a 53% stake in the new entity from current shareholders of Qube for INR3.3 billion ($51.5 million). Selling shareholders include Intel Capital and Nomura, which invested $16 million in Qube, then called Real Image Media Technologies, in 2008. Qube Digital will then merge with UFO subsidiary PJSA Technosoft.
Following the announcement of the merger, UFO’s stock price jumped to INR459 from the November 1 closing price of INR432.
Currently, UFO services around 4,000 cinema screens across India, while Qube has around 3,300. The companies have complementary geographical strengths, with Qube’s strongest penetration in South India and UFO dominant in other regions, and also serve complementary client bases.
“We are excited to combine our business with such a strong partner,” said Sanjay Gaikwad, UFO's founder and managing director, in a statement. “Qube has not only built a strong digital cinema and in-cinema advertising network in India but has also developed interesting technology products relating to film business for global application. The combined company will have a stronger position in India’s digital cinema distribution and in-cinema advertising industry.”
UFO was founded in 2005 and attracted investment from 3i Group and Providence Equity Partners. Both firms made partial exits in the company’s 2015 IPO, which saw it raise INR6 billion. According to market data, 3i exited its remaining holding in 2016 for INR1.43 billion, while Providence still held a 19% stake as of March this year according to UFO’s most recent annual report.
For the year ended March 2017, UFO reported INR6 billion in revenue, up from INR5.7 billion the year before. Net profit for the same period fell from INR674 million to INR666 million.
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