Zee Entertainment, Sony finally move forward with merger. All you need to know

Despite much acrimony and opposition by minority investors like Invesco, the proposed merger between Zee Entertainment and Sony Pictures Networks India has finally gone through as the 90-day period to conduct due diligence comes to a close.

The merger will create perhaps India’s biggest entertainment network. Zee managing director Punit Goenka will head the combined entity despite bitter opposition from minority shareholders, including Invesco, which had opposed the move. 

So, who gets what in the final deal?

Following the proposed merger, Sony India shareholders will hold a 52.93% stake in the combined entity and Zee shareholders will own 47.07%. The merged entity’s nine-member board will include five Sony executives. There will also be three independent directors.  

According to a report in The Economic Times, the five Sony nominees on the combined board include Tony Vinciquerra, chairman and CEO of Sony Pictures Entertainment (SPE); Ravi Ahuja, chairman, Global Television Studios and SPE corporate development and Erik Moreno, executive vice-president, corporate development and M&A, SPE.

Does the term sheet have any important clauses that the shareholders need to know about?

Yes. According to the ET report, the term sheet includes a clause that Zee’s promoter family is free to increase its shareholding from the current 4% to up to 20%. This became a cause of concern for shareholders which Zee is likely to address and clarify that such a process will not be dilutive to other shareholders.  

Does this mean the Zee-Invesco imbroglio is now over?

Not really. Even as Sony and Zee have closed the deal, Zee’s largest shareholder Invesco in an open letter had raised issues against the stake enhancement of the promoter family. Invesco in the letter dated October 11 had asked “why the founding family, which holds under 4% of the company’s shares, should benefit at the expense of the investors who hold the remaining 96%”.

In addition, Invesco had demanded an extraordinary general meeting (EGM) to rejig the board and for Goenka’s ouster and took the matter to court when Zee did not call the meeting.

The Zee-Invesco matter is currently being argued at the National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT) and Bombay High Court.

At loggerheads with Zee, Invesco’s vote for a merger with Sony will be key for the media company as Invesco controls a 17.88% stake in Zee.

But otherwise, how significant is the deal for India’s entertainment industry?

A Moneycontrol report cited analysts as saying that the merger between Zee and Sony will bring tremendous synergies between the two companies that will exponentially grow the business. Analysts see the deal as a big positive move for the industry. 

The merger will create the largest entertainment network in India with a 26% viewership share. In addition, Zee-Sony combined will command a share of 51% as of first-quarter FY22 data in the Hindi general entertainment channel segment, which is the top genre on TV in terms of viewership. In Hindi movies, which is another top-performing genre, the Zee-Sony entity will have a viewership share of 63%.