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Good News for ZEEL Shareholders | ZEE-SONY Deal Almost Done?

Good News for ZEEL Shareholders | ZEE-SONY Deal Almost Done?

Published on 23 September 2021 Views 73 Comments 0
There is a piece of good news for Zee Entertainment Enterprise Limited (ZEEL) Investors and Shareholders as the board has given in-principle approval for its merger with Sony Pictures Networks India (SPNI). Let’s discuss more this deal in detail in this article.

Introduction:

Media and entertainment giant Zee Entertainment Enterprise Limited (ZEEL) board has given in-principle approval for its merger with Sony Pictures Networks India (SPNI).

Invesco’s proposal for removal of CEO & MD

In the last week, there was a series of activities that took place with Zee Entertainment Limited (ZEEL) which was reflected in the stock price as well. Invesco, the biggest Institutional Investor in the company proposed the removal of Punit Goenka, who is the current CEO and MD of the company on the grounds of the Corporate Governance issue.
This proposal of ZEEL was questioned by the other Institutional Investors to which there was not a clear response from the side of Invesco, and hence these investors did not back Invesco.

ZEEL-SONY Deal:
  • On  Thursday, September 22, 2021, ZEEL announced the merger with Sony Pictures Networks India (SPNI), the subsidiary company of Sony Corporations.
  • In this deal, Shareholders of Sony Pictures will own the majority stake in the merged company.
  • Zee said that the company and SPNI have entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations, and program libraries.
  • ZEEL will hold around 47.07% stake in the merged entity while the rest stake 52.93% will be owned by Sony Shareholders.
  • Sony Pictures Entertainment will infuse USD 1.575 Billion in the merged entity.
  • The Power and Rights of nominating the majority of the  Board of Directors will be in the hands of Sony Group.
  • But here the positive news is that as part of the transaction, Punit Goenka will continue to be the Managing Director and CEO of the merged firm for the next 5 years.
  • According to the term sheet, the promoter family is free to increase its shareholding from the current - 4% to up to 20%, in a manner that is following applicable law.
  • This deal will next be forwarded to the National Company Law Tribunal (NCLT) and Securities and Exchange Board of India (SEBI) for approval. Also, Shareholder’s Approval will be on the list.
  • Further, this deal will also seek approval from the Competition Commission of India (CCI).
  • The synergy between these companies can be good enough as Zee works well in fiction space while SONY is a good player in Non-fictional Space.
  • The combined entity will have a total of 75 TV Channels, and 2 Video Streaming Channels i.e., ZEE5 and SonyLIV. Apart from this, the merged entity will also have 2 Film Studios which include ZEE Studios and Sony Pictures India Limited. Also, there will be Digital Content Studio by the name of StudioNext.
Conclusion:

As of now, the only problem with the ZEEL was its entry into other businesses than Media & Entertainment, which was not its Core-Competence, and hence some suffered some hard times. Hence, this deal might be good news for the company as well as its shareholders. Also if the synergy between ZEE-SONY goes well, then the appreciation could be on a higher side. But there are many if’s and but’s, as approvals of Shareholder’s, NCLT, SEBI, and CCI is awaited. This discussion is not direct advice to invest in the stock and hence one should consult his/her financial advisor before making any investment decision.

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