NEW DELHI: Japanese multinational conglomerate Sony has come to the rescue of Zee Entertainment Enterprises’ (ZEEL) Punit Goenka, son of promoter Subhash Chandra and MD & CEO of the firm, who till last week was facing opposition from the firm’s largest shareholders.
Sony Pictures Networks India (SPNI), a step-down subsidiary of Sony Corp, and ZEE on Wednesday announced a proposed merger to create India’s largest entertainment network with 75 channels which will control over 1/4th of total viewership market.
This development took place after a high-voltage drama of last week when ZEE’s largest shareholders Invesco Oppenheimer Developing Markets Fund and OFI Global China Fund LLC were seeking Goenka’s removal from the company’s board. Separately, proxy advisory firms InGovern and Investor Advisory services raised concerns around corporate governance favouring the promoter family.
Chandra and Goenka have averted this risk, at least for the time being. As part of the transaction between ZEE and Sony, Goenka will continue to be the MD and CEO of the merged entity even as SPNI would hold a majority stake at 52.93% and would appoint the majority of the Board of Directors. ZEE will own the remaining 47.07%.
According to the term sheet, ZEE’s promoter family will hold 4% share which can be increased to 20%. The promoters of SPNI will also provide an incremental stake of around 2.1% (worth Rs 1,075 crore) to the ZEEL promoters in the merged company. The merger terms also include non-compete arrangement between the promoters of Zee and Sony.
As part of the deal, Sony would invest growth capital so that SPNI has a cash balance of approximately $1.57 billion at closing. The term sheet provides an exclusive period of 90 days during which ZEE and SPNI will conduct mutual diligence and finalize definitive agreement(s). But some of the terms of the merger agreement would face both regulatory and shareholder hurdle.
“It may be pertinent to note that SEBI Takeover code does not permit differential treatment between the promoter and public shareholders,” says Ravishu Shah - MD & Co-Head Valuation, RBSA Advisors.
SPNI to hold majority stake at 52.93%
As part of the transaction between ZEE and Sony, Punit Goenka will continue to be the MD and CEO of the merged entity even as SPNI would hold a majority stake at 52.93% and would appoint the majority of the Board of Directors. ZEE will own the remaining 47.07%