Teji Mandi Explains: Sony becomes white knight for Zee Entertainment, signs merger deal

Punit Goenka, the current CEO and Managing Director of Zee Entertainment Enterprise, was being pressured by the company’s two main investors to step down. Invesco Developing Markets Fund and OFI Global China Fund had earlier called for a special meeting of shareholders to discuss his removal. But it looks like Punit Goenka is not going anywhere anytime soon.

Merger Details

Punit Goenka set in motion a merger with Sony Corporation. In this arrangement, Sony Pictures Networks India (SPN) will hold a majority stake in the merged entity. After SPN infuses growth capital in the merged entity, SPN will hold a 52.93% stake in the merged entity, while Zee will hold the remaining 47.07%. Zee and Sony are among India’s largest media and entertainment companies, and after this merger, they will together hold a leadership position in the industry.

Post-Merger Scenario

Post-merger, the entity will be the largest entertainment company in India. The combined entity (Zee and Sony) will own about 75 TV channels, 2 video streaming services, 2 film studios and a digital content studio. This will also directly positively impact the entity’s financials. The revenue is expected to be over Rs 13,000 crore, with employees over 4,000. In fact, Zee’s promoter is free to increase its shareholding from 4% (current) to 20%. Although the board will consist of a majority of directors from Sony Group, Punit Goenka will continue to be the CEO and MD of the merged entity. A big win for Goenka, who was battling to keep the ship sailing.

Not the First Time Sony Tried To Acquire Zee

Yes, Sony Corporation was also earlier in talks with Subhash Chandra in 2019 to repay lenders. Sony was one of the shortlisted ones, but the talks weren’t fruitful as the discussion failed on differences overvaluation. Lastly, Chandra sold about 11% stake to Invesco. Now, it is the largest investor in Zee with a 17.88% stake.

What’s in Store Ahead?

With Zee’s presence in over 170 countries with over 1.3 billion reach and Sony’s 700 million viewers in India, there’s absolutely no doubt that these two will create a massive network in the near future. Zee already dominates the regional market while Sony has a presence globally which will increase the viewership by over 26%.

A few days back Goenka was facing a risk of exiting the Zee business. This merger shows his capability to remain in control of the company, despite losing a good amount of stake.

Published on- Thursday, September 23, 2021, 04-38 PM IST