India’s two biggest media networks Sony Pictures Networks India (SPNI) and Zee Entertainment Enterprises Ltd. (ZEEL) announced their merger, wherein the former will infuse $1.575 billion (~ Rs 11,615 crore) in the merged entity for future growth opportunities.
On September 22, Sony Pictures and Zee Entertainment have signed an exclusive, non-binding Term Sheet to merge their linear networks, digital assets, production operations, and program libraries. The Term Sheet proposes a 90-day exclusive negotiation period during which both companies will conduct mutual due diligence and negotiate definitive, binding agreements.
The merger of Sony and Zee will form a new publicly listed company in India, that will own 75 TV channels, two video streaming services (ZEE5 and Sony LIV), two film studios (Zee Studios and Sony Pictures Films India), and a digital content studio (Studio NXT).
What Does the Zee Sony Merger Deal Mean for Investors?
It is important to note that Sony Pictures, which is an indirect wholly-owned subsidiary of Sony Group Corporation, would hold a majority stake of 52.93% in the merged entity, while Zee Entertainment would hold the remaining 47.07%.
Punit Goenka, Managing Director and Chief Executive Officer of Zee Entertainment, will continue to hold the position in the merged entity.
The board of directors of the ZEE-SONY merged company would include directors nominated by Sony Group, giving Sony Group the right to nominate the majority of the board members.
The share price of Zee Entertainment Enterprises hit a 52-week high of Rs 319.50, gaining 25 percent intraday on September 22 after the announcement of the merger deal with Sony Pictures India.
The merger announcement came just a week after Zee Entertainment’s two largest shareholders, Invesco Developing Markets and OFI China Fund, demanded the resignation of two executive directors, as well as CEO Goenka.
It is important to note that this is not the first time when Sony has tried to acquire ZEE. In 2019, when Subhash Chandra, the founder of Zee Entertainment, was looking for prospective buyers to repay lenders, and Sony was one of the three shortlisted companies he was in talks with. However, the deal fell through owing to valuation disagreements, and Chandra subsequently sold nearly an 11% stake to US-based Invesco Oppenheimer Developing Markets Fund, an existing public shareholder in ZEEL.