Mumbai: Media giant Subhash Chandra is busy saving the $1.575 billion merger deal of Zee Entertainment Enterprise Ltd (ZEEL) with Sony Pictures Networks India (SPNI) after Invesco Developing Markets Funds and OFI Global China Fund, LLC (Invesco) . An Extraordinary General Meeting (EGM) with 18% stake was called for, along with the inclusion of six independent directors, as well as the removal of ZEEL Managing Director Puneet Goenka from the board.
Analysts are of the view that Goenka’s appointment is seen as an integral part of the merger deal with Sony and this development may hamper the working of the entire deal.
The Board of ZEEL termed Invesco’s demand as “invalid and illegal” and accordingly expressed its inability to convene the EGM of Invesco.
ZEEL-SPNI merger deal:
On 23 September, ZEEL agreed to merge with SPNI with a majority of 52.93% of the merged entity holding SPNI shareholders, while the remaining 47.07% of the merged entity would be held by ZEEL shareholders, forming the combined entity. Will go It was agreed that Mr. Punit Goenka would continue to be the Managing Director and CEO of the merged entity. Further, a specific non-compete arrangement shall be agreed between the promoters of ZEEL and the promoters of SPNI. As per the term sheet, the promoter family is free to increase its stake from the current 4% to 20%, subject to applicable law. Most of the board of directors of the merged entity was to be nominated by the Sony Group.
Invesco demands EGM to remove Mr. Goenka as MD
Invesco’s demand for the EGM shows that the largest Zee shareholder wants a complete break from the previous promoters. Besides seeking the removal of ZEEL MD and CEO Punit Goenka and two other directors from the company’s board, Invesco wants the board to be reconstituted “in a free and democratic manner” with the appointment of six additional independent directors.
In an open letter to other shareholders, Invesco highlighted the need to strengthen the board’s independence in light of the “failures” of governance and leadership and the media giant’s “prolonged poor performance”.
Invesco has expressed concerns over certain conditions in the proposed deal, such as non-compete fees to be paid to Zee promoters, claiming that it will “enrich Zee’s founding family at the expense of ordinary shareholders.”
Reliance’s entry and exit in ZEEL deal
In February, Mukesh Ambani-led Reliance Industries held talks with Puneet Goenka to merge Reliance Media assets with Zee at a fair valuation. However, the deal could not be done due to differences between Mr. Goenka and Invesco over the requirement of the founding family to increase their stake by subscribing to preferential warrants.
Reliance even went to the extent of making board level proposals.
A Reliance said, “Zee and our assets were valued on similar parameters. The proposal sought to harness the strengths of all the merged entities and help create substantial value for everyone, including Zee’s shareholders.” Will get it.” Statement.
According to Reliance, investors (Invesco) felt that the founders could always increase their stake by buying in the market.
“Reliance has always endeavored to continue the existing management of the investing companies and reward them for their performance. Accordingly, the proposal includes continuation of Mr. Goenka as Managing Director and an ESOP for management including Mr. Goenka. The issue was involved. At Reliance, we respect all the founders and have never resorted to any hostile transactions. Hence, we did not proceed,” the Reliance statement said.
However, the Goenka camp believes that its reliance is behind Invesco’s proposal to scrap the mega-merger deal with Sony. Subhash Chandra appeared on its Zee News and hinted that a corporate house is behind Invesco’s proposal in the name of Mukesh Ambani or Reliance.
Like daily serials, Zee Entertainment has witnessed a lot of drama. If Mr. Chandra will be able to salvage the deal, it is now a question of $1.65 billion.
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