CCI Approves Merger between Eros International Plc, STX Filmworks, Inc. and Marco Alliance Limited

On July 8, 2020, CCI approved the merger between Eros International Plc (‘Eros Plc), STX Filmworks, Inc. (‘STX’) and Marco Alliance Limited (‘Marco’). The Agreement and Plan of Merger was entered into among Eros Plc, England Holdings 2 Inc (‘England Holdings 2’), England Merger Corp (‘Merger Sub’) and STX.[1]

The combination involved the following steps: (i) Merger Sub, a wholly owned subsidiary of Eros Plc would merge with and into STX, and STX would become a wholly owned subsidiary of Eros Plc., which would then change its name to Eros STX Global Corporation. (‘Combined Company’); and (ii) pursuant to Eros Plc entering into a PIPE Subscription Agreement with certain investors, Hony Group Management Limited (‘Hony Capital’) through Marco (an existing investor in STX), would be expected to acquire an economic interest and voting interest along with board nomination rights and certain contractual rights in the Combined Company.

Eros Plc, the ultimate entity controlling the Eros group of companies (‘Eros Group’) is engaged in inter alia the acquisition, co-production and distribution of Indian films in formats such as cinema, television and digital new media. It also owns and operates the over-the-top (‘OTT’) platform Eros Now which owns rights to films across Hindi and regional languages. England Holdings 2, an indirect, wholly owned subsidiary of Eros Plc, has been incorporated for the purposes of the combination.

STX, the ultimate parent entity of the STX group of companies, does not have any physical presence in India. In India, STX is indirectly engaged solely in the licensing of English language film content to third parties for theatrical and non-theatrical exploitation. The activities of STX are: (i) licensing of film content to third party distributors for theatrical exhibition; and (ii) licensing of film content to third party distributors for television broadcasting (linear and non-linear), through digital formats (rental and purchase), including on OTT platforms, and through physical formats (rental and purchase), such as on BluRay.

Marco is an investment holding company and a wholly owned subsidiary of Hony Capital Fund V., L.P., which is controlled by Hony Capital, an investment management firm. Hony Capital is, inter alia, engaged in private equity buyouts and has a presence in areas including real estate, hedge funds, mutual funds, and innovation investment. Hony Capital has an investment in PCCW International OTT (Cayman Islands) Holdings Limited (‘PCCW OTT’), which launched its OTT platform i.e., Viu in India.

Overlaps were noted in the OTT segment, the theatrical production market, and the audio-visual (‘AV’) licensing market.

With respect to the OTT segment, CCI noted that PCCW OTT had decided to shut down operations in India. CCI did not find any competitive concerns in the OTT segment.

With respect to the theatrical production market, CCI observed that the parties’ market shares were insignificant and that the incremental market share was miniscule. Additionally, CCI observed the presence of various other players such as DreamWorks UTV, Wave, Red Chillies Entertainment, Amir Khan Productions, Bhansali Productions, Vinod Chopra Films, RK Films, Nadiadwala Grandsons Entertainment, Dharma Productions and Reliance Entertainment.

With respect to the AV licensing market, the parties had a combined market share between 5-10%. CCI noted that the incremental market shares were insignificant and several other players such as Yash Raj Films, Excel Entertainment, T-series, Rohit Shetty Films Pvt Ltd and Nadiadwala Grandsons Entertainment, Viacom Inc., and The Walt Disney Company were present in the AV licensing market.

CCI observed a vertical relationship between Eros Plc (present in the upstream markets of theatrical and AV licensing) and Eros (present in the downstream markets of theatrical distribution and OTT). However, CCI observed that the presence of the parties was too insignificant to raise any concerns of competition foreclosure.

Accordingly, CCI granted its approval.

[1] Combination Registration No. C-2020/05/745

Published In:Inter Alia Special Edititon - Competition Law - December 2020 [ English
Date: December 18, 2020