Invesco wants EGM to Replace Punit Goenka from the Post of MD & CEO
The Zee Entertainment story appeared to have a happy ending last week after the merger announcement with Sony Pictures. The merger will give the combine a 27% market share of the Indian entertainment and sports market with a total of 75 plus channels.
However, the rift between the current management and its largest shareholder, Invesco, is far from over. That is, if you go by the latest letter written by Invesco to Zee.
The letter has called for an urgent EGM (extraordinary general meeting) of shareholders to decide on the removal of Punit Goenka from the post of MD and CEO of Zee. Invesco wants the EGM to be held before the conclusion of the Zee-Sony merger.
According to Invesco, the decision on an important aspect like merger should have been taken ahead of the merger announcement, which was not done.
In fact, Invesco has specifically pointed to the merger as a case of poor corporate governance. Invesco expected to be taken into confidence before announcing the merger. It felt structural management changes should have preceded the merger announcement.
When Invesco first wrote the letter to Zee Entertainment on 11th September, it had called for removal of non-independent directors and inducting 6 directors recommended by Invesco.
In the merged entity, Sony nominates majority of directors. For Invesco, the best way to prevent this happening is to insist on the EGM to vote on the proposal and the constitution of the board. Then Invesco wants the reconstituted board to consider the merger afresh.
Invesco had called for the removal of Punit Goenka and 3 other directors from the board. Invesco was of the view that with just 3.44% stake in the combined entity, the former promoter family was exercising influence disproportionate to the quantum of holdings.
Post-merger, Subhash Chandra's stake in the combine goes up to 4%, thanks to 2% non-compete payment to Zee promoters. The promoter family also has the leeway to enhance this stake from 4% to 20%. That is precisely what Invesco wants to avoid.
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