Zee Sony merger deal: Sony involves Zee Leisure’s rescue, indicators time period sheet for merger

The jumbo leisure deal in a nutshell

  • Punit Goenka stays as MD and CEO, the merger will fend off Invesco that wishes him out
  • The destiny of NP Singh, MD & CEO of SPN, is but unknown.
  • The mixed entity will personal 75 TV channels, 2 video streaming companies (ZEE5 and Sony LIV), two movie studios (Zee Studios and Sony Photos Movies India) and a digital content material studio (Studio NXT), making it the most important leisure community in India, larger than Star & Disney India.
  • They may also have over Rs 13,600 crore in revenues and an worker depend of over 4,000
  • If the merger goes by means of, it will likely be one of many few circumstances the place the promoters managed to stay in charge of their firm regardless of shedding important stake and buyers’ belief.

Punit Goenka, MD and CEO of Zee Leisure Enterprises (ZEE), has discovered his white knight in Sony Corp and set in movement a merger that can fend off the most important investor Invesco, which sought his removing from ZEE’s board.

Zee-Sony Photos Networks India merger: Particulars of the massive bang leisure deal defined

Sony has signed a non-binding merger take care of Zee Leisure. ET’s Gaurav Laghate takes you thru the deal’s contours, which can create an leisure behemoth with 75 channels and the way firm promoter Subhash Chandra proved as soon as once more that he’s a grasp on the artwork of creating a deal when the chips are down. Watch

As a part of the proposed merger, which the board of administrators of ZEE permitted in-principle on Tuesday evening unanimously, will enable shareholders of Sony Photos Networks India (SPN) – a step-down subsidiary of Japanese multinational conglomerate Sony Corp – to carry a majority stake within the merged entity.
Based mostly on the present estimated fairness values of ZEE and SPN, the indicative merger ratio would have been 61.25% in favour of ZEE. Nevertheless, SPN shareholders may also infuse development capital into SPN as a part of the merger in order that SPN has roughly $1.575 billion (round Rs 11,615 crore) at closing, to be used in pursuing different development alternatives.

ZEE mentioned that with the proposed infusion of development capital into SPN, the resultant merger ratio is predicted to end in SPN holding 52.93% stake within the merged entity, whereas ZEE shareholders will personal the remaining 47.07% stake.

The merged entity will stay a publicly listed entity in India with Goenka as MD & CEO, whereas NP Singh, MD & CEO of SPN, is prone to be on the board of the corporate.

The vast majority of the board of administrators of the merged entity shall be nominated by Sony Group.

“Sony is firmly dedicated to investing in India. SPE (Sony Photos Leisure) could have a majority stake within the mixed firm, and we count on that NP will maintain a management function on its board of administrators,” Ravi Ahuja, chairman of International Tv Studios and Sony Photos Leisure Company Improvement, wrote in an inside mail to the staff.

“ZEE and SPN are amongst India’s largest media and leisure firms throughout genres, languages, and built-in content material platforms and resonate strongly with shoppers. The mix of ZEE and SPN will convey collectively the strongest management groups, content material creators, and high-quality sequence and movie libraries within the media enterprise and can create a mixed content material platform that may compete with home and international platforms and speed up that area’s transition to digital,” Ahuja mentioned within the mail, a replica of which was accessed by ET.

With the ZEE board authorising the administration to activate the required due diligence course of, each ZEE and SPN have signed an unique non-binding time period sheet to mix their linear networks, digital property, manufacturing operations and content material libraries.

The mixed entity will personal 75 TV channels, two video streaming companies (ZEE5 and Sony LIV), two movie studios (Zee Studios and Sony Photos Movies India) and a digital content material studio (Studio NXT), making it one of many largest leisure networks in India.

As per the final out there monetary particulars, they’ve over Rs 13,600 crore in revenues and an worker depend of over 4,000.

In the meantime, the promoters of the 2 firms may also signal sure non-compete preparations as a part of the transaction.

In keeping with the time period sheet, the promoter household of ZEE is free to extend its shareholding from the present 3.99% to as much as 20%, in a fashion that’s in accordance with relevant regulation.

The ultimate transaction shall be topic to completion of customary due diligence and execution of definitive agreements and required company, regulatory and third-party approvals, together with the votes of ZEE’s shareholders.

“The board of administrators at ZEE have carried out a strategic evaluation of the merger proposal between SPN and ZEE,” mentioned R Gopalan, chairman, ZEE. “As a board that encompasses a mix of extremely achieved professionals having wealthy experience throughout various sectors, we at all times consider the most effective pursuits of all of the shareholders and ZEE. We have now unanimously supplied in-principle approval to the proposal and have suggested the administration to provoke the due diligence course of.”

Gopalan added that ZEE continues to chart a “sturdy development trajectory” and the board firmly believes that this merger will additional profit ZEE.

“The worth of the merged entity and the immense synergies drawn between each the conglomerates is not going to solely enhance enterprise development however may also allow shareholders to learn from its future successes. As per authorized and regulatory pointers, on the required stage, the proposal shall be offered to the esteemed shareholders of ZEE for his or her approval,” Gopalan mentioned.

The non-binding time period sheet supplies an unique negotiation interval of 90 days throughout which ZEE and SPN will conduct mutual diligence and negotiate definitive, binding agreements. If the merger goes by means of, it will likely be one of many few circumstances the place the promoters managed to stay in charge of their firm regardless of shedding important stake and buyers’ belief.

“We’re solely at first of what is going to possible be a months-long course of. The subsequent 90 days shall be an unique negotiating interval for each firms to conduct due diligence and negotiate definitive paperwork,” Ahuja mentioned. “I need to thank NP and his groups at SPN for his or her arduous work and dedication, management at Sony Group HQ for his or her assist, and company growth and authorized groups, particularly Erik Moreno (EVP, Company Improvement and M&A, SPE), John Fukunaga (EVP, Company Authorized and deputy basic counsel, SPE), and Eric Gaynor (SVP, company authorized, SPE) and their groups, who I don’t assume have slept a lot within the final a number of days!”

This isn’t the primary time Sony has tried to accumulate ZEE.

In 2019, when Subhash Chandra was scouting for potential patrons to repay lenders, Sony was one of many three shortlisted firms he was in talks with. Nevertheless, the talks failed resulting from variations over valuation and in the end, Chandra offered near an 11% stake to Invesco, which grew to become the most important investor in ZEE with a 17.88% stake.

On September 11, two of Invesco’s funds – Invesco Growing Markets Fund and OFI International China Fund – despatched a discover to ZEE, calling for a unprecedented basic assembly (EGM) searching for the removing of Goenka.

Invesco additionally needed the removing of two different administrators – Ashok Kurien and Manish Chokhani – from the corporate’s board.

Each Kurien and Chokhani give up final Monday, regardless of being up for reappointment through the annual basic assembly on September 14th.

The present promoter holding in ZEE is 3.99% and the market cap has come right down to Rs 24,555.58 crore on Tuesday.

The shares of ZEE closed at Rs 255.65 apiece on BSE on Tuesday, up 0.14%.

Curiously, after the take care of ZEE didn’t fructify, SPN initiated talks with Reliance Industries-controlled Viacom18 for the same merger in November 2019. Nevertheless, the on-again-off-again deal additionally didn’t undergo with Reliance in the end pulling the plug in October final yr, after months of negotiations.

In 2016, SPN had acquired the sports activities broadcast enterprise of ZEE, housed beneath Ten Sports activities model, for $385 million, in an all-cash deal.

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