Subhash Chandra Takes Up a Good Deal on his Zee Stake
One week is a long time in the history of any business. We saw that live in the previous week as the erstwhile controlling promoters of Zee moved from a defensive position to a position of strength. Let us first rewind to Monday, 13th September.
That was the day, the stock of Zee saw a sudden rally. There were reports that two large institutional investors of Zee, viz. INVESCO and OFI China Fund wanted Punit Goenka, the son of Subhash Chandra, to resign from the position of MD and CEO.
Their contention was that for the 3.44% holding in Zee Entertainment, the Subhash Chandra family was exercising inordinate clout. It was also confirmed that two directors; Ashok Kurien and Manish Chokhani had already resigned from the Zee Board.
If that looked like end-game for the Subhash Chandra family, that would have been a gross misjudgement. By 20th September, Zee Entertainment had announced a mega merger with Sony Pictures.
The idea was to combine the sports and general entertainment franchise of Sony Pictures with the strong regional content franchise of Zee. The term sheet also specified that Punit Goenka will continue as MD & CEO for 5 years.
Also Read :- What does the Zee merger with Sony mean?
If that looked like a symbolic victory for Subhash Chandra, more is on the way. The family stake was to get diluted from 3.44% to 2% due to the deal. However, Sony has topped up with an additional 2% stake to Subhash Chandra as part of the non-compete clause.
This 2% will be given to Subhash Chandra out of the Sony Pictures stake. Effectively, Sony will end with just about 50.93% stake. In addition, Subhash Chandra also gets the option to increase this stake from 4% to 20% subject to terms and conditions.
Sony has had it good too. While they are infusing $1.4 billion in cash into the new entity, they get access to the vast library and regional content stack of Zee. That is the perfect launching pad for its OTT initiatives and to take on the might of Disney Hotstar in India. In a way, it is good that the promoter does not lose control over his brainchild.
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