Zee Entertainment to merge with Sony
Punit Goenka will be CEO & MD of combined entity for 5 yrs
Zee Entertainment Enterprises (ZEEL) has found a white knight in rival Sony with the latter agreeing to merge its India entertainment business with the beleaguered firm, thus creating India’s largest entertainment network with about $2 billion in revenues and 26 per cent viewership share.
The ZEEL board announced on Wednesday that it had approved a non-binding term sheet with Sony Pictures Networks India to merge their operations, and that the promoters of Sony would invest $1.57 billion in the merged entity as growth capital.
According to the indicative initial merger ratio, ZEEL shareholders will own approximately 47 per cent in the merged entity, while the promoters of Sony India will hold 53 per cent after the infusion of growth capital, it said in a statement. On the basis of the existing estimated equity values of ZEEL and Sony India, the indicative merger ratio would have been 61.25 per cent in favour of ZEEL. However, with the proposed infusion of growth capital, Zee’s stake is pegged at 47 per cent, it added.
While the promoters of Sony will have the right to appoint the majority of directors to the board, Punit Goenka, chief executive officer and managing director of ZEEL, will become the CEO and MD of the combined entity.
Goenka’s appointment, however, will be subject to the necessary approvals from the nomination remuneration committee, the board, and shareholders of the merged company, the firm said.
In consideration of the existing promoters of ZEEL and their affiliates agreeing not to compete with the merged company, the promoters of Sony India will transfer around 2 per cent stake in such a way that the Subhash Chandra family will hold a total of 4 per cent in the merged entity. Consequently, Sony India will hold a 51 per cent stake in the merged entity, while Zee shareholders will cumulatively hold the remaining 49 per cent.
According to the term sheet, Chandra, who set up India's first private sector entertainment network, has the option to raise the stake up