While the talk around Zee Telefilms is whether AOL Time Warner will acquire a strategic stake in Subhash Chandra's company, the media baron seems to be on an acquisition spree of his own.

Hardly had the dust settled on Zee's buyout of ETC Networks Ltd (which runs channel etc and etc Punjabi), it was announced yesterday that Zee is acquiring a 32.8 per cent strategic stake in Padmalaya Telefilms Ltd (PTL). This is being done through the acquisition of a 64.3 per cent stake in PTL's holding company, Padmalaya Enterprises Pvt Ltd (PEPL).

ZTL will pay Rs 590 million in an all cash deal for the 32.8 per cent stake in PTL and includes a preferential allotment to be made by PTL to PEPL, and a mandatory 20 per cent open offer the holding company will have to make following the change in the ownership of promoters' holding. The preferential allotment will be at a price of Rs 142.20 per share and the open offer will be at the price of Rs 148.50 per share. ZTL has entered into an MoU with PTL for this acquisition.

"With this deal Zee will get access to Padmalaya's film library of 300 movies and 1,500 hours of TV software useful for sourthern markets and allows us to consolidate PTL financial's with ZTL's balance sheet," Chandra has been quoted as saying.

ZTL will hold 64.3 per cent in the holding company while PTL's present promoters, Seshagiri Rao and his family, will hold 36 per cent. PTL has convened an extraordinary general meeting (EGM) of PTL on March 27 to seek shareholder approval for the preferential allotment.

Subsequent to this preferential allotment, PEPL will make an open offer (to be funded by ZTL for Rs 320 million) to the shareholders of PTL at a price of Rs 148.5 per share to acquire an additional 20 per cent stake in PTL. Post-preferential allotment and open offer, PEPL's holding in PTL will be 51 per cent. ZTL and the promoters of PTL would jointly control management of PTL. Both Zee and PTL have the right to appoint nominees on the board of PTL relative to their respective shareholding PTL and PEPL.

Zee's acquisition of PTL creates an entertainment powerhouse with strengths in animation software, film production and distribution and television content. The synergising of the operations of the animation units of Zee and PTL will make it the largest animation filmmaker in Asia, the company claims.