Mumbai: Zee Entertainment and Enterprise Ltd (ZEEL) has signed a merger agreement with Sony Pictures Networks India Private Limited (Sony India), a deal that will allow the latter to infuse $1.575 billion (Rs 11,615 crore) in the merged entity for a majority stake of 52.93%.
After the announcement, ZEEL shares jumped 9.99% to touch its upper circuit of Rs 281.2 in a firm Mumbai market on Wednesday, valuing it at Rs 27,009.7 crore.
"The Board of Directors of ZEEL at its meeting held on September 22, 2021, has approved the execution of a non-binding term sheet with Sony India, in relation to a potential transaction involving a composite scheme of arrangement for the merger of the Company and Sony India and infusion of growth capital by the promoters of Sony India into Sony India as part of the merger," ZEEL said in a regulatory filing.
According to ZEEL, the board considered financial parameters and the strategic value the partner provides to the table. The ZEEL board concluded that the combination would benefit all shareholders and stakeholders. The merger is under ZEEL's plan to become a premier media and entertainment company in South Asia, with more robust growth and profitability. The ZEEL Board has permitted the company's management to begin the appropriate due diligence procedure.
As per the terms of the deal, ZEEL's Punit Goenka will continue as MD & CEO of the merged entity for five years, and if the deal goes through, it will fend off the largest investor Invesco, which sought his removal from ZEE's board.
Commenting on the deal, Mr. R. Gopalan, Chairman, ZEEL, "The Board of Directors at ZEEL have conducted a strategic review of the merger proposal between SPNI and ZEEL. As a Board that encompasses a blend of highly accomplished professionals having rich expertise across varied sectors, we always keep in mind the best interests of all the shareholders and ZEEL. We have unanimously provided in-principle approval to the proposal and have advised the management to initiate the due diligence process. ZEEL continues to chart a strong growth trajectory, and the Board firmly believes that this merger will further benefit ZEEL."
The merged entity: India's largest entertainment network
ZEEL and SPNI have entered into a non-binding term sheet and have agreed to combine both companies' linear networks, digital assets, production operations, and program libraries.
The merged entity will own 75 television channels, two video streaming services (ZEE5 and Sony LIV), two film studios (Zee Studios and Sony Pictures Films India), and a digital content studio (Studio NXT), making it India's most prominent entertainment network, surpassing Star and Disney India.
The combined entity is expected to generate over Rs 16,000 crore in revenues and employ around 4,000 people.
The merged entity will be listed, and Sony Group will nominate the majority of the board of directors of the merged entity.
"Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25% in favor ofZEEL. However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07% of the merged entity to be held by ZEEL shareholders," said the ZEEL statement.