MUMBAI: Sony Pictures Networks India (SPN) and Zee Entertainment Enterprises Ltd. (ZEEL) Wednesday announced that they have entered into an exclusive, non-binding Term Sheet to combine both companies’ linear networks, digital assets, production operations and program libraries.
The combined entity will have a consolidated topline of about Rs 140 billion based on FY21 results and a viewership market share between 25 to 30%.
The non-binding Term Sheet provides an exclusive negotiation period of 90 days during which ZEEL and SPN will conduct mutual diligence and negotiate definitive, binding agreements. The combined company would be a publicly listed company in India and be better positioned to lead the consumer transition from traditional pay TV into the digital future.
The merger of ZEEL and SPN would bring together two leading Indian media network businesses, benefitting consumers throughout India across content genres, from film to sports. The combined company is expected to benefit all stakeholders given strong synergies between ZEEL and SPN.
Under the terms of the non-binding Term Sheet, Sony Pictures Entertainment, parent company of SPN, would invest growth capital so that SPN has a cash balance of approximately $1.575 billion (Rs 116.26bn) at closing for use to enhance the combined company’s digital platforms across technology and content, ability to bid for broadcasting rights in the fast-growing sports landscape and pursue other growth opportunities.
Sony Pictures Entertainment would hold a majority 52.93% stake in the combined company. ZEEL shareholders will take the remaining 47.07% stake.
“Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25% in favour of ZEEL. 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 of all the shareholders and ZEEL. We have unanimously provided an in-principle approval to the proposal and have advised the management to initiate the due diligence process,” ZEEL said in a statement.
Current ZEEL managing director & CEO Punit Goenka is to lead the combined company. The combined company’s board of directors would include directors nominated by Sony Group and result in Sony Group having the right to nominate the majority of the board members.
It is anticipated that a final transaction would be subject to completion of customary due diligence, negotiation, and execution of definitive binding agreements, and required corporate, regulatory and third-party approvals, including ZEEL shareholder vote.
The merger between ZEEL and Sony India would create an entertainment behemoth encompassing TV broadcasting, OTT, and film production. ZEEL owns and operates 49 entertainment channels across 11 languages, while Sony India runs 26 channels in entertainment and sports genres.
The merged entity will be head and shoulders above its rivals in Hindi GEC genre with channels like Sony Entertainment Television (SET), Zee TV, Sony Sab, &TV, Zee Anmol and Sony Pal. The joint entity will also become a pre-eminent player in Hindi movie genre with brands like Sony Max and Zee Cinema in addition to other specialised channels like &pictures, Sony Max2, Zee Classic, Zee Action, and Zee Bollywood.
Sony-Zee will also have a strong presence in the sports genre and will challenge the dominance of Star Sports, besides tackling new entrants like Viacom18. The merged entity will also have a wide footprint in regional markets like Marathi, Bengali, Tami, Telugu, Malayalam, and Kannada.
The merged entity will also strengthen its presence in the OTT space with two platforms, SonyLIV and ZEE5. It will also consolidate its presence in the film production space.
ZEEL’s consolidated revenues for the year ended 31st March 2021 stood at Rs 77.299bn, compared to Rs 81.299bn in the previous year, a decline of 4.9%. The company’s net profit was up 52% to Rs 8bn from Rs 5.265bn.
SPN’s consolidated revenue for the fiscal ended 31st March 2021 has dropped 4% to Rs 57.216bn from Rs 59.611bn in FY20. SPNI’s consolidated net profit for the fiscal was down 35% to Rs 5.822bn from Rs 895.5bn.
