Zee Entertainment Enterprises Ltd (ZEEL) and Sony Pictures Networks India Pvt Ltd (SPNI) signed definitive merger agreements on Wednesday, after a 90-day exclusivity period to conduct due diligence. Zee Entertainment’s board of directors approved its merger with Sony on December 22, 2021. According to the board, Sony will hold 50.86 percent of the combined entity. According to the press release issued, both entities have combined their linear networks, digital assets, production operations, and program libraries, and the combined company will be listed on the Indian stock exchange. Closing of the transaction is subject to certain customary conditions, including regulatory, shareholder, and third-party approvals.
Under the terms of the definitive agreements, SPNI is expected to hold cash of $1.5 billion at closing, including the cash that will be infused by the current shareholders of SPNI as well as the promoter founders of ZEEL.
The move is intended to enable the combined company “to drive sharper content creation across platforms, strengthen its position in the rapidly evolving digital ecosystem, bid for media rights in sports’ fast-growing landscape, and pursue other growth opportunities”, the release said.
The agreement provides for Sony Pictures Entertainment (SPE) Inc to pay ZEEL promoters/founders non-compete fees, which they will use to invest primary equity capital into SPNI. Following the completion of the transaction, they would have the ability to acquire shares of SPNI, which would eventually equal approximately 2.11 percent of the combined company’s shares. According to the statement, SPE, an indirect subsidiary of SPNI, will pay the non-compete fees through a subsidiary.
”After the closing, SPE will indirectly hold a majority of 50.86 percent of the combined company, the promoters (founders) of ZEEL will hold 3.99 per cent, and the other ZEEL shareholders will hold a 45.15 per cent stake,” read the statement.
To comply with the definitive agreement, the promoter founders of ZEEL have agreed to hold no more than 20 percent of the combined company’s shares. The statement said they are not entitled to any preemptive or other rights to acquire equity in the combined company from Sony Group, the combined company or any other party.
Punit Goenka, the CEO of ZEEL, will lead the combined company as its Managing Director and CEO. According to the joint statement, the Sony group will nominate the majority of the board of directors of the combined company, including SPNI’s current Managing Director and CEO, NP Singh.
Goenka said, ”The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms… This merger presents a significant opportunity to jointly take the businesses to the next level and drive substantial growth in the global arena.”
The merger was opposed by Invesco, whose combined stake in ZEEL is about 17.9 percent. There has been a push by the US-based shareholder to discuss various issues, including Goenka’s removal citing “corporate governance failures”. The two entities are currently engaged in legal battles over the issue.