Sony, Zee Sign Merger Agreement, Punit Goenka To Be CEO Of Merged Entity

Sony would invest $1.575 billion and hold 52.93 per cent stake in the merged entity, while Zee would hold the remaining 47.07 per cent

Punit Goenka, CEO of Zee Entertainment Enterprises. Image: Getty

New Delhi:  Zee Entertainment Enterprises and Sony Pictures Networks India on Wednesday announced that they have signed definitive agreements for their merger following conclusion of an exclusive negotiation period during which both parties conducted mutual due diligence.

In a joint statement, the two companies said they have “signed definitive agreements to merge Zee with and into Sony Pictures and combine their linear networks, digital assets, production operations and program libraries”.

The agreements follow the conclusion of an exclusive negotiation period during which Zee and Sony Pictures conducted mutual due diligence, it added. When the merger deal was announced in September, the two networks had said Sony would invest $1.575 billion and hold 52.93 per cent stake in the merged entity, while Zee would hold the remaining 47.07 per cent.

Under the terms of the definitive agreements, the statement said SPNI will have a cash balance of $1.5 billion at closing, including through infusion by the current shareholders of Sony Pictures and the promoter founders of Zee.
This is aimed at enabling the combined company "to drive sharper content creation across platforms, strengthen its footprint in the rapidly evolving digital ecosystem, bid for media rights in the fast-growing sports landscape and pursue other growth opportunities", it added.

According to the joint statement, Punit Goenka will continue to be the managing director (MD) and chief executive officer (CEO) of the merged entity. The majority of the board of directors of the combined company will be nominated by the Sony Group and will include the current Sony Pictures India Managing Director and CEO N P Singh.

After closing, the new combined company will be publicly listed in India. The closing of the transaction is subject to certain customary closing conditions, including regulatory, shareholder, and third-party approvals, the statement said.

As part of the deal, Sony Pictures Entertainment will pay a non-compete fee to certain promoter founders of Zee, which will be used by them to infuse primary equity capital into Sony Pictures India. This would entitle them to acquire shares of SPNI, which would eventually equal approximately 2.11 per cent of the shares of the combined company on a post-closing basis.
The payment of non-compete fee by Sony Pictures Entertainment, of which Sony Pictures India is an indirect subsidiary, will be through a subsidiary, the statement said.

“After the closing, Sony Pictures Entertainment will indirectly hold a majority 50.86 per cent of the combined company, the promoters (founders) of Zee will hold 3.99 per cent, and the other Zee shareholders will hold a 45.15 per cent stake,” it added.

Under the definitive agreement, the promoter founders of Zee have agreed to limit the equity that they may own in the combined company to 20 per cent of its outstanding shares. This construct does not provide them any pre-emptive or other rights to acquire equity of the combined company from the Sony Group, the combined company or any other party, the statement said.

Sony Pictures Entertainment Chairman of Global Television Studios and SPE Corporate Development, Ravi Ahuja said, “Today marks an important step in our efforts to bring together some of the strongest leadership teams, content creators, and film libraries in the media business to create extraordinary entertainment and value for Indian consumers.”

Sony Pictures India MD and CEO NP Singh said the merger will create a company that’s “best in class and will redefine the contours of the media and entertainment industry”.

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.”