Zee Enterprises board approves merger with Sony Pictures
Zee Entertainment Enterprises (ZEEL) on Wednesday announced that its board of directors at a meeting held on 21st September, unanimously provided an in-principle approval for the merger with Sony Pictures Networks India (SPNI). Shares of Zee surged more than 20% on the BSE in Wednesday’s early trade post the deal announcement.
As part of the transaction, Punit Goenka will continue to be the Managing Director and CEO of the merged entity.
Zee, which has a presence in television broadcasting and digital media with brands such as Zee TV, has been under pressure from top investors like Invesco who last week had sought removal of its three directors, including the exit of Chief Executive, Punit Goenka, from the board.
The shareholders of Sony Pictures will hold a majority stake in the merged entity. They will also infuse growth capital into SPNI as part of the merger such that SPNI has approximately $1.575 billion at closing, for use in pursuing other growth opportunities.
Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25% in favour of ZEEL. However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07% of the merged entity to be held by ZEEL shareholders and the balance 52.93% of the merged entity to be held by SPNI shareholders.
Zee & Sony have entered into a non-binding term sheet to combine both companies’ linear networks, digital assets, production operations and program libraries. The term sheet provides an exclusive period of 90 days during which the two parties will conduct mutual diligence and finalize definitive agreement(s). The merged entity will be a publicly listed company in India.
Santosh Meena, Head of Research, Swastika Investmart Ltd said, “The recent announcement of a deal with Sony will be a very positive trigger for Zee ltd.. Though the deal is a nonbinding agreement so it will take some time for more clarity but this deal will bring a good synergy for both the company to grow their businesses and the combined entity will become the largest player in the industry.”
Meena added that the stock is trading at very attractive valuations and it is one of the strongest and FIIs favorite stocks in the media space and if this deal concludes then we may see a big rerating in the counter. Technically, “it is witnessing a breakout of falling channel formation and manages to move above its all-important moving averages where 300 is an immediate and psychological hurdle; above this, it is likely to head towards 350 mark. On the downside, 250 has become a strong support mark,” he said.
Zee in an exchange filing on Wednesday said that the board concluded the merger will be in the best interest of all the shareholders & stakeholders and it is in line with ZEEL’s strategy of achieving higher growth and profitability as a leading Media & Entertainment Company across South Asia.
It is anticipated that the final transaction would be subject to completion of customary due diligence and execution of definitive agreements and required corporate, regulatory and thirdparty approvals, including the votes of Zee’s shareholders.
NEWS CREDIT: LIVE MINT