MUMBAI: Reports late last week that Punit Goenka, managing director and CEO of Zee Entertainment Enterprises Ltd, had flown to Los Angeles to sign off on the proposed merger between Zee and Sony Pictures Networks India (SPN), have gained further heft.
US investment fund Invesco has reportedly cooled off considerably on its objections to the deal as long as one principal condition is met. Which is that the Goenka family does not get any preferential equity (PE) in the merged entity.
Hindu BusinessLine, quoting industry sources, reports that Invesco views the merger as a positive for the Indian media major but wants clarity over the contours of the deal, especially in how the promoter family would increase its stake from 4 to 20% in the merged entity.
“The only thing Invesco has asked for in the transaction is to know how promoters will be increasing their shareholding from 4 to 20 per cent. There should not be any dilution for other shareholders. If it happens from open market purchases by Goenka instead of preferential equity, then Invesco will vote for the merger,” the business daily quotes an an industry source as having said.
Open market acquisition
HBL, quoting another source, reports that Goenka is unlikely to get any preferential equity and may acquire additional stake from the open market.
“Promoters will be able to purchase additional shares at the open market price, and not at a discounted price through the preferential shares route,” said source said.
Invesco, the largest minority shareholder in Zee with an 18% stake, has been in a bitter legal battle with the media major demanding the removal of Goenka from the company’s board, citing corporate governance issues.
Lack of clarity
Zee and Sony had earlier announced a plan to merge the two businesses, giving Goenka and his father Subhash Chandra 4% stake initially, which could be scaled up to 20%.
A press release issued by the company did not clarify how this increase would happen except that it will be “in a manner that is in accordance with applicable law”.
The lack of clarity in this clause raised alarm bells in the Invesco camp. Invesco had earlier stated that it did not necessarily oppose the merger, as long as it is approved by Zee shareholders.
Zee share price up
News that Invesco had softened its stance on the SPN-Zee merger and that the deal would be announced soon saw Zee Entertainment shares climb on Monday to a 52 week high at Rs 363.50, up 4% in Monday’s intra-day trade on the BSE. Shares surged on National Stock Exchange as well, reaching a peak of Rs 361.95, up by nearly 3.5%.
On the BSE, Zee has surpassed its previous high of ₹362.85, touched on September 23.
