Balaji, Packer TV deal may be no-go

A proposed merger between Nine Networks Entertainment India and Balaji Telefilms is undergoing scrutiny

By CNN's Kristie Lu Stout and wire reports

BOMBAY, India (CNN) -- A proposed merger between India's Balaji Telefilms with Kerry Packer's Nine Networks Entertainment India is undergoing critical review.

The Indian television content provider is reviewing the proposal after Packer's Channel Nine and national broadcaster Doordarshan failed to reach an agreement on an extension to a programming contract.

Balaji Telefilms confirmed to the BSE stock exchange in Mumbai Friday that it was reviewing the merger with Nine Network Entertainment India "due to the recent developments."

Balaji Telefilm shares, which dropped almost 5 percent to Rs114.25 on Thursday, rebounded 7.8 percent to Rs123.90 by Friday afternoon on the BSE.

"We are taking a re-look at the alliance in light of the changed circumstances," Balaji Telefilms chief executive Sanjay Doshi earlier told India's Economic Times.

Another look before going ahead

Channel Nine wants a five-year, prime time contract, while the state-owned Doordarshan wants an 18-month contract.

Balaji Telefilms is reviewing the Nine Networks merger proposal since it would be restricted by the agreement to provide programming to Channel Nine.

Doshi said the idea behind the alliance was to give Balaji Telefilms a steady revenue stream as a preferred content supplier.

"However, we now have to look at their plans before going ahead with the merger," Doshi added.

The Balaji chief exec told Dow Jones last month the merger was delayed because of legal formalities, fueling rumors that the deal would collapse.

Talks on the merger plan continue this week, and the companies are expected to make an announcement on the proposed alliance by early next week.

The merger proposal was announced last November, hours after Balaji Telefilms made its debut on the Bombay Stock Exchange.

The deal involves a swap ratio of 64 Balaji shares for 200 shares of Nine Network.

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