Zee Entertainment and Sony Pictures Networks India are merging, with the latter injecting an additional $1.6 billion into the combined organisation to fuel future expansion.
This news could not have come at a better moment for Punit Goenka’s entertainment enterprise. The majority of Zee Entertainment’s shareholders voted to fire Goenka and two other independent directors. While the others had given up, Goenka stayed put.
Why Sony merge with Zee entertainment
Corporate governance agencies had previously expressed concerns about Zee’s board of directors’ mishandling. They urged voting against the re-appointment of directors Ashok Kurien and Manish Chokhani earlier this month, citing misgovernance as a reason. IiAS and InGovern voiced concerns about considerable erosion of shareholder capital, accountability for losses incurred as a result of party-related activities, and the board’s preference for the promoter family, despite the fact that promoter stock had plummeted.
Is Zee-Sony deal at risk
The TV behemoth revealed its merger talks with Sony while Invesco was pressing for a Zee shareholder meeting. According to the terms of the agreement, Goenka would remain CEO of the amalgamated company, which will be majority owned by Sony.
Invesco has stated in Indian tribunal hearings that it is not opposed to the Zee-Sony deal, but that its filing criticises how the two companies went into negotiations.
According to Invesco, the Sony acquisition would allow Chandra’s family to increase their stake to up to 20% from 4% today, and it was “clearly an attempt to divert the broader public” and block the convening of a shareholder meeting.
Both merger deal
While the motive for Zee is the pressure brought on by Invesco, from Sony’s standpoint, it is a major commitment to merge with a listed firm and establish the country’s largest media company,” said Shriram Subramanian, MD of InGovern Research Services. Sony will also be investing $1.575 billion in this transaction; as a result, Sony will most likely seek participation on the board of directors and ensure that the company is better governed.”
The agreement between Zee and Sony, if it happens, is positive from both an industry and shareholder viewpoint,” Hetal Dalal, President of IiAS, noted. However, there are a few milestones along the route where the deal contours need to be further fleshed out before investors believe their fears have been alleviated.” Dalal, on the other hand, feels that if the acquisition goes through, Sony would likely tighten the purse strings by hiring a new CFO for the merged firm, and Punit Goenka will report to a different board. “Sony will propose the vast majority of them.” In this regard, we anticipate a higher level of management oversight quality.
The promoters (Essel Group) will retain roughly a 4% ownership in the amalgamated corporation, with 2% of the shares being handed to the promoter family to prevent them from investing in competing businesses. The Chandra-owned Essel Group, on the other hand, has the option to grow its ownership to 20% over time, according to the merger agreement.
Therefore, In addition, the promoters of ZEEL and SPNI will come to an agreement on specific non-compete agreements. According to the term sheet, the promoter family has the option to grow its shareholding from 4% to up to 20% in accordance with applicable law,” according to the press statement.
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