“The merger will go through” said Mr. Punit Goenka in an interview highlighting that he may or may not be the CEO of the merged Entity. The Sony-Zee Merger which was announced way back in 2021 is still pending regulatory approval. The deal is set to create a 10 billion dollar enterprise which was to be under the control of Mr Goenka. These comments come after the comments made by Sony highlighting the possibility of re-examining the developments and potential of a merger.
Earlier, Mr Goenka had clarified that the resulting entity would be under the control of Sony and I was chosen as the CEO. After the interview, Zee shares opened with an increase of 2.6% and a 3% increase in intraday shares. It was further clarified that the teams of Sony and Zee regularly meet to discuss the stages of amalgamation.
The Deal
Currently, Mr Punit Goenka is the CEO and MD of Zee Enterprises. And had signed a definitive agreement with Sony. Within this merger, Sony would hold the majority stake, while Zee Family would own a mere 3.99% stake. In addition to this, Sony will pay a hefty amount as non-compete fees to the Zee promoters. After the closing of the deal, the final share ratio would result in a 50.86% shareholding with Sony, 3.99% shareholding with the Zee family and the rest of the shareholding with the existing shareholders.
The combined strength of both these companies would result in an entity with 75 TV channels, 2 OTT platforms and several studios and programming libraries. A peculiar thing to note is that the deal would not create pre-emptive or any other rights in the entity.
But the deal ran into legal trouble. Mr Chandra, the father of Mr Goenka, had structured the deal in a way to retain some sway over the Zee. This was done by diverting companies’ funds to related entities. Zee holds nearly 1 billion dollars in assets including the rights to music and movies. And if the deals fall through the creditors of Zee might attempt to drag the company into filing for bankruptcy.
Views of the Regulator
Due to the siphoning of funds in related entities, the Securities Exchange Board of India imposed a ban on Mr Goenka and Mr Chandra. The ban bars them from directorial positions in listed firms. This ban led to a delay in the deal. Another reason for the delay was the legal battle over loan default by a Zee Subsidiary.
Against this order, Mr Chandra and Goenka have appealed to the Securities Appellate Tribunal to get a stay order on the NCLT decision. The reason to approach this tribunal was cited – they have not been heard by the regulators. Fighting this battle, SEBI doubled down by filing a 197-pager reply against Mr Chandra and Mr Goenka. In its affidavit, Sebi has cited reasons such as violations and wrongdoings which were sought to be covered up with multiple false disclosures.
Apart from this, the Competition Commission of India approved the merger between both entities in October 2022. But this approval came with certain conditions and modifications. These modifications were voluntarily proposed by the entities involved. This combination involves the following companies – Sony Pictures, Zee Entertainment, Bangla Entertainment and the Essel group.
