Ending an acrimonious five-year old relationship, Subhash Chandra-owned Zee Telefilms and Murdoch's Star TV signed the deal today in Hong Kong. The transaction, however, would be subject to approvals from the shareholders of ZTL and the Indian laws including the Reserve Bank of India and other competent authorities.

Reacting to the news, Zee Telefilms, which is one of the star performers on the Indian bourses, moved up by Rs 155 to Rs 4,739. After the deal, Star will get around 7.5 per cent stakein ZTL's current capital, for which the latter has already asked for shareholder permission in the forthcoming annual general meeting on September 27.

ZTL is already in the process of integrating 50 per cent stake in Asia Today Ltd (ATL) through acquisition of shares from Zee Multimedia Worldwide Ltd.

In 1994, Star TV acquired 50 per cent of ATL and Patco, the companies which operate the Zee Television network. Shortly thereafter, Star TV acquired a 50 per cent stake in Siticable, India's largest cable system operator. Today's announcement follows Chandra's move to consolidate all his holdings into his listed company, ZTL. Due to recent merger of Zee Multimedia with Zee TV, Subhash Chandra's own stake in ZTL has gone up from 56 per cent to over 70 per cent.

Speaking on the deal, a Star TV spokesperson said: `We have enjoyed very profitable relationship with Chandra and ZTL. In this restructuring, we expect to achieve even greater returns as the newly merged entity will now be best positioned to maximisethe value of these assets. We will continue to ride the growth in value creation through our continued investment in ZTL.'

The Star spokesperson said, since they are converting their stake from ATL to TV software maker - ZTL, they would still be an important and strategic investor in ZTL and they could continue to look forward to bigger returns in the years ahead.

Zee Telefilms Managing Director Vijay Jindal said this acquisition is of historic value and is happening in the countdown to the next millennium. He expressed happiness that the two partners' conviction and vision, despite differences in the past, have finally converged to make ZTL, India's first truly global media entertainment conglomerate.

Jindal said this transaction would further enhance returns on investment to the shareholders and investors. Besides, ZTL will now be a wholly Indian company in all its domains and as an Indian company, it would now be poised to tap even larger business opportunities in the emerging liberalised mediabroadcasting regulatory scenario in the country, he added.

`The news is extremely positive for Zee Telefilms. I think they got out News Corp fairly cheap. The stock should spurt. Subhash Chandra has been wanting control of the broadcasting company ATL for a long time. Zee had advertising revenues of Rs 414 crore in 1998-99 (April-March), all of which will come to Zee now instead of only 50 per cent earlier,' said an analyst.

Said an analyst with Jardine Fleming, `The move is very good for Zee. The consolidated entity (Zee Telefilms) will be much stronger as it will get control of distribution, broadcasting and cable operation.' However, the valuations appear to be a little stretched since broadcasting is a risky business compared to the earlier business of advertising and programming which is a cost plus business -- a win-win situation, analysts said.

``Both Star and Zee express happiness on this transaction as it will put an end to all the disputes and the court cases between them,'' a Zee statementsaid, without elaborating.