Zee Entertainment and Sony India Agreed to Combine
Zee Entertainment Enterprises Ltd.’s board has given its approval to a merger with Sony Pictures Networks India Pvt. days after investors urged for leadership change at India’s largest publicly listed television network over governance concerns. Zee Entertainment announced on Wednesday morning that its board had authorized the signing of a nonbinding term sheet with sony India. Zee Entertainment and Sony India Agreed to Combine.
This entails a possible business combination between the firm and Sony India in which a composite structure of arrangement would be utilized. In a meeting on Sept 22, Zee Entertainment’s board gave its approval for the transaction. Prior to the merger, Sony India’s promoters will inject development money into Sony India in order to give it a cash reserve of approximately $1.58 billion (Rs 11,800 crore). According to the initial merger ratio, Zee Entertainment investors will own approximately 47.07% of the new firm, while Sony India promoters will control 52.93%. As a result, the promoters of Sony India will be able to select the majority of directors on the new company’s board. The organizations’ boards must now decide how to split up the duties of all of its executives, including Pituitary. Mr Goenka will retain his position as managing director and CEO of the combined entity, according to the filing. He was excused from attending the board meeting.
The agreement stipulates that the promoter of Zee Entertainment, Subhash Chandra, and his Essel Group, receives a non-compete fee. Chandra’s son Goenka is involved. The promoters of Sony India will transfer equity in the merged firm to the Essel Group to maintain its stake at 3.99 percent. presently, Essel Group owns three-tenths of one percent of Zee Entertainment. Public shareholders (57.46%), insurance firms (10%), and mutual funds (8.1%) are responsible for the remainder.). According to a press release from the firm, the term sheet provides for the promoter family’s right to purchase up to 20% more shares. A shareholder agreement is required for a merger with Sony India.
During this investor buzz, billionaire investor Rakesh Jhunjhunwala and BofA Securities Europe SA purchased shares of Zee Entertainment, helping to drive the company’s share price to a new high. Despite governance concerns at Zee Entertainment, public investors will soon have to decide whether business gains from a Zee-Sony merger outweigh the image of the deal and how it re-cements Goenka and his father’s status in the firm.