Sony Pictures Networks India (SPNI) and Zee Entertainment Enterprises Ltd (ZEEL) will merge their operations to create an entity with over $2 billion in annual revenues, 75 channels across different genres, and a 26 per cent viewership share.
The move will come as a huge relief to ZEEL’s promoter group led by Subhash Chandra as they were facing multiple headwinds including a threat from investors to oust Chandra’s son, Punit Goenka, from the company board.
Merger pact
Under the terms of the merger agreement, ZEEL will own 47.07 per cent stake in the combined entity and the balance 52.93 per cent will be held by SPNI shareholders. Zee’s promoter family will hold 4 per cent, which can be increased to 20 per cent.
Sony Pictures Entertainment, the parent company of SPNI, will invest growth capital so that SPNI has a cash balance of $1.575 billion at closing for use to enhance the combined company’s digital platforms across technology and content, ability to bid for broadcasting rights in the fast-growing sports landscape, and pursue other opportunities.
90-day negotiation period
The two entities have entered into an exclusive negotiation period of 90 days during which ZEEL and SPNI will conduct mutual diligence and negotiate definitive, binding agreements. The combined entity would be a publicly listed company in India. Current ZEEL Managing Director and CEO Punit Goenka is to lead the combined outfit but the Sony Group will have the right to nominate the majority of the board members.
The development comes in the aftermath of a bitter boardroom battle, with Zee’s largest shareholders, Invesco Oppenheimer Developing Markets Fund and OFI Global China Fund LLC, seeking the removal of Goenka from the company’s board. Corporate governance bodies InGovern and Investor Advisory Services had also raised concerns around corporate mis-governance.
R. Gopalan, Chairman, ZEE Entertainment Enterprises Ltd. said, “The board has conducted a strategic review of the merger proposal between SPNI and ZEEL. We have unanimously provided in-principle approval to the proposal and advised the management to initiate the due diligence process.”
Positive for Zee
Analysts said the deal is positive for ZEEL. “There is a big opportunity in terms of synergies as Sony is doing well in sports, mainstream GEC whereas Zee has a strong recall in the regional genre, where Sony is low or absent; both have a very strong movie catalogue that can be used for OTT and TV offering,” said analysts at Elara Capital.
ZEEL has a presence in over 173 countries and reaches more than 1.3 billion people. Sony has over 700 million viewers in India and is available in 167 countries. Zee has over 260,000 hours of television content with rights to more than 4,800 movie titles across various languages. Sony, on the other hand, has rights to live sports events including cricket and the WWE. Goenka said in an analysts call that it could take 6-8 months for the merger to conclude.