Sony deal lifts Zee Leisure 31%

The shares of Zee Leisure Enterprises Ltd rallied 31 per cent on Wednesday after the announcement of a merger with Sony Photos.

Zee Leisure Enterprises Ltd closed at ₹337.10 on the BSE, up ₹81.45 or 31.86 per cent on the BSE. It recorded a recent 52-week excessive of ₹355.40 in the course of the day. It had opened at ₹281.20 as towards the earlier shut of ₹255.65. The corporate’s m-cap stood at ₹32,378.98 crore.

On the NSE, it closed at ₹333.70, up ₹78.00 or 30.50 per cent. It recorded a recent 52-week excessive of ₹355.35.

Zee’s rally additionally pushed the Nifty Media Index up 13.57 per cent to 2,204.75. Nifty Media additionally recorded a recent 52-week excessive of two,267.95 in the course of the day led by Zee.

Sony Photos Networks India (SPNI) and Zee Leisure Enterprises Ltd. (ZEEL) at present introduced that they will merge their operations. The businesses have entered into an unique, non-binding Time period Sheet to mix each firms’ linear networks, digital property, manufacturing operations and program libraries.

Whereas Subhash Chandra-backed Zee will personal 47.07 per cent stake within the merged entity, the stability 52.93 per cent is to be held by SPNI shareholders. In keeping with the time period sheet, Zee’s promoter household will maintain 4 per cent stake which might be elevated to twenty per cent.

Sony Photos Leisure, the mum or dad firm of SPNI, would make investments progress capital in order that SPNI has a money stability of roughly $1.575 billion at closing to be used to reinforce the mixed firm’s digital platforms throughout know-how and content material, potential to bid for broadcasting rights within the fast-growing sports activities panorama and pursue different progress alternatives.

The non-binding Time period Sheet supplies an unique negotiation interval of 90 days throughout which ZEEL and SPNI will conduct mutual diligence and negotiate definitive, binding agreements. The mixed firm can be a publicly listed firm in India. Sony Photos Leisure would maintain a majority stake within the mixed firm whereas the present ZEEL Managing Director & CEO Punit Goenka is to steer the mixed firm.

The information comes quickly after Invesco Growing Markets Fund (previously Invesco Oppenheimer Growing Markets Fund) and OFI International China Fund LLC, which collectively maintain 17.88 per cent in Zee Leisure referred to as for a unprecedented normal assembly of the shareholders of the corporate to hunt the ouster of Subhash Chandra’s son Punit Goenka because the director of the corporate.

Analysts bullish

In keeping with analysts, the merger might be perceived as a optimistic for the corporate’s inventory.

Santosh Meena, Head of Analysis, Swastika Investmart Ltd stated, “It was anticipated that Punit Goenka is not going to simply lose his positions and Zee might give you a white knight or different counter supply however the market knew that it is going to be a win-win scenario for Zee shareholders whether or not there will probably be any change in administration and board or another participant come to purchase a majority stake within the firm.”

“The current announcement of a take care of Sony will probably be a really optimistic set off for Zee Ltd as it is going to have a high quality promoter and that may ease the problem of company governance within the firm. Although the deal is a non-binding settlement so it is going to take a while for extra readability however this deal will carry a great synergy for each the corporate to develop their companies and the mixed entity will turn into the biggest participant within the business. The inventory is buying and selling at very enticing valuations and it is without doubt one of the strongest and FIIs favorite shares within the media area and if this deal concludes then we may even see a giant rerating within the counter,” added Meena.

Ashwin Patil, Sr. Analysis Analyst (media) at LKP Securities stated: “Sony is powerful within the Hindi GEC phase (particularly in non-fiction area) the place Zee is weak. Zee is powerful in motion pictures (throughout genres) and regional GEC area. Zee has ~18% community viewership share and Sony needs to be ~10-12% in our view. Moreover, Sony is powerful in Sports activities as properly. Thus it will be a great strategic match from broadcast, digital and content material perspective.”

In keeping with Patil, Zee is prone to get considerably re-rated. It presently trades at ~23x/19x FY22/FY23 earnings.

Ravishu Shah – Managing Director & Co-Head Valuation, RBSA Advisors stated, “Merger phrases envisage non-compete association between the promoters of Zee Leisure Enterprises Restricted (“ZEEL”) and the promoters of Sony Photos Networks India (“SPNI”), which can present an incremental stake of ~2.1% to the ZEEL promoters within the merged firm (indicative worth of ~1,075+ crore).”

“It is going to be attention-grabbing to see how Regulators and Institutional shareholders reply to such non-compete association with the promoters of a listed firm as a part of the merger course of. It might be pertinent to notice that SEBI Takeover code doesn’t allow differential remedy between the promoter and public shareholders,” stated Shah.

“Additionally, acquiring ZEEL shareholder approval for the proposed merger and for the continuation of MD and CEO of ZEEL because the MD and CEO of the merged entity for subsequent 5 years might entail challenges contemplating the present harassed relationship between sure institutional shareholders of ZEEL and ZEEL Board/ Administration. On an general foundation, the merger is predicted to supply strategic synergies and the money stability of practically $1.57 billion of SPNI will present progress impetus to the merged entity. Additionally, the proposed structure of the Board of the merged entity (majority administrators to be appointed by Sony), might assist allay the issues of sure institutional shareholders,” added Shah.

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