Zee Entertainment to merge with Sony. All you want to know

Zee Entertainment to merge with Sony. All you want to know
by 5paisa Research Team 22/09/2021

India may have just got its biggest entertainment deal yet. The beleaguered Zee Entertainment Enterprises Ltd has got a saviour, with the Indian subsidiary of the Japanese media and electronics giant Sony Corp agreeing to merge the company with itself and taking a majority stake. 

As part of the deal, which the Zee board has approved in principle, Sony Pictures Networks (SPN) India will effectively hold a 52.93% stake in the merged entity. The remaining 47.07% will remain with Zee shareholders. 

The deal announcement propelled Zee’s shares higher by 25% to as much as Rs 319.50 apiece on the BSE. The shares later cooled off a tad to Rs 302.40 apiece, valuing the company at Rs 29,000 crore.

What exactly is Sony getting in the deal?

All assets owned by Ze including the entertainment TV channels it owns, its OTT platform Zee5, its catalogue of TV and online programmes and movies, and its film studio Zee Studios. These will be controlled by the merged entity.
The merged entity will also house Sony’s TV channels (75 in all), the OTT platform Sony LIV, Sony Pictures Films India and Studio NXT, which makes digital content. 
The new entity will effectively own the biggest suite of entertainment content services in India, bypassing Disney India and Star India.    

Why is Sony the majority owner here?

This is because SPN India, Sony’s India entertainment arm, is investing an additional $1.575 billion or Rs 11,615 crore, to capitalise the merged entity. This money will allow the new entity to grow its business further. 

Had Sony not infused more cash, Zee shareholders would have held a majority stake with 61.25% shares. 

What did Zee’s board of directors say about the merger?

Zee’s board said the “merger will be in the best interest of all the shareholders and stakeholders”. The board also said that the deal is in line with Zee’s strategy of achieving higher growth and profitability as a leading media and entertainment company across South Asia.

Who will head the merged entity?

Zee managing director and chief executive officer Punit Goenka will head the combined company for five years. This is significant because a group of Zee’s institutional investors led by Invesco had been demanding his ouster. 

It is unclear if Sony India chief NP Singh will continue to be a part of the merged entity or will move on to another role. 

How much stake does Zee’s promoter family own? What can they now do?

The existing promoter family of Zee, including Goenka and his father Subhash Chandra, currently own barely 4% stake in Zee Entertainment. 

However, as per the deal with Sony, they will have an option to increase their shareholding to as much as 20% in the normal course of business. 

Who will have a majority on the board?

A majority of the board of directors of the merged entity will be nominated by Sony Group. 

What happens to Zee’s news business?

The news business is not part of the merger deal and remains under Zee Media Corp, which is controlled by Subhash Chandra’s Essel Group.

However, media reports this week speculated that Zee Media could be on the radar of billionaire Gautam Adani, India’s second-richest man who has announced his group’s entry into the media business.

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