ZEEL-Sony deal: Was Zee Entertainment cheaply merged with Sony for personal gain?

New Delhi . The ZEEL-Sony deal came out last week. However, even after the deal, the tussle continues in the board of Zee Entertainment. Many stories are coming out on this deal and the ongoing controversy in the board of Zee. On the one hand, the two largest shareholders of Zee are adamant on the company’s demand to call the EGM, while on the other hand some foreign stakeholders are saying that the deal has been done with Sony cheaply.

Invesco Oppenheimer, one of the two largest shareholders of Zee Entertainment Enterprises Ltd (ZEEL), is adamant on removing MD & CEO Punit Goenka from Zee. It is also demanding the reorganization of the board. Despite the merger deal with Sony, the two largest shareholders of ZEEL have written letters twice, reiterating the demand for ezim.

SEBI’s new regulation
One of the immediate reasons behind Invesco’s emphasis on EGM is the new regulation of SEBI. It contains guidelines regarding the appointment of independent directors, which will be effective from January 2022.

According to the new regulation of SEBI, a special resolution will be required for the appointment, re-appointment and removal of independent directors. Also, the number of votes in this should be three times that of the opposition. At present, it requires only 50 percent vote share.

Considering the non-binding nature of the ZEEL-Sony deal, Invesco is looking to reconstitute the board before the new SEBI rule comes into force. A person associated with the matter said that, ‘If for some reason the deal does not happen and time passes, then it can be difficult to make changes in the board. Therefore, both the big shareholders want changes in the board before that.

ZEEL minus Subhash Chandra family
There is also another angle in this whole matter. That is ZEEL minus Subhash Chandra family i.e. Subhash Chandra family should be thrown out. The reason for this is that it is possible for Zee to find more customers which is possible with the new board. Many other investors may be interested in buying Ji if Subhash Chandra’s family moves out from Ji. Many big investors have problems with the Subhash Chandra family on the board.

A prominent proxy advisory firm spokesperson said that, this is something that “is like valuing a house with an unwanted tenant versus valuing a vacant house.”

Another way for the Chandra family
Another advisor said that the Chandra family has another way in this matter. Subhash Chandra family should increase their stake in ZEEL from 4 per cent to 20 per cent in the next five years. Will it be only through a QIP or Sony will reduce its share and give it to the Subhash Chandra family.

According to a leading foreign fund manager, Sony may have bought ZEEL cheaply to protect the interests of the promoters of ZEEL.

was the deal cheap
This can be understood with a simple calculation of a deal. The value of ZEEL was $ 3.2 billion (Rs 23,680 crore) but Sony valued ZEEL for $ 2 billion ( Rs 14,800 crore) for the deal. The deal was done at Rs 246 per share of ZEEL. Also, giving 2 per cent extra stake to ZEEL promoters also seems unnecessary.

The matter changed due to the standing of the big promoter

A foreign institutional stakeholder said that ZEEL is a unique asset. It is also one of the strongest media franchises in the country which has the potential to grow rapidly. Now it has become a property game. Now there is every possibility that more non-media companies will also take interest in this deal through open bidding.

When big investors remain silent, there is nothing others can do. But with Invesco taking a stand, the situation will change now. Gone are the days of trading shares at cheap valuations with Invesco taking a strong stand against ZEEL promoters and exposing the governance irregularities.

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