Invesco Objects to the Merger of Zee and Sony Pictures

The stand-off between Zee Entertainment board and its largest investor, Invesco Fund, has played out in the public domain for the last 1 month. A lot has transpired in this period. It all started with Invesco calling for the removal of Punit Goenka from the post of MD & CEO. This was followed by Zee announcing a quickly stitched merger with Sony Pictures. Repeated requests by Invesco to call an EGM were denied by the Zee board.

Check - Invesco wants EGM to Replace Punit Goenka from the Post of MD & CEO

In the midst of all the legal and procedural wrangling, there is a latest development in which Invesco has objected to the merger of Zee and Sony Pictures. Invesco’s contention is two-fold. Firstly, Invesco is unhappy that despite being the largest shareholder of Zee with 17.88% stake, it was not consulted on the deal. Secondly, Invesco has expressed concerns that the deal would favour the Subhash Chandra family at the cost of other shareholders.

It is actually about the non-compete fee

The bone of contention is the non-compete fee that Sony is paying to the Subhash Chandra family. The fee will not be a cash payment but it will be a stock payment. As per the term-sheet, Sony will have 53% in the merged entity while Zee will have 47%. 

However, Sony will transfer 2% out of its shareholding to the Subhash Chandra family as non-compete fee. Invesco’s contention is that non-compete fee questions should not arise when Punit Goenka has been appointed the MD and CEO of the merged entity for next 5 years.

The real catch in this story is the ownership shift that Invesco is wary of. Currently Invesco holds 17.88% in Zee while the Subhash Chandra family holds 3.44%. Post the deal, Invesco will only hold 8.4% while Subhash Chandra family will hold 4% (including the non-compete fee). That is what is riling Invesco as it feels that the narrowing of ownership gap between Invesco and Subhash Chandra family was not justified.

The next steps would depend on the verdict of the NCLT on the holding of EGM and how the voting happens at the EGM. For now, the battle lines are drawn and neither side is willing to relent on their stand.

Also Read:-

Zee Refuses to Call for EGM at the Request of Invesco Fund

What does the Zee merger with Sony mean