Tuesday, December 5, 2023

Sony-Zee merger creates India’s largest entertainment company

Zee Entertainment Enterprises Managing Director Punit Goenka (left) with Chairman Emeritus Subhash Chandra. (Photo: Punit Goenka’s Twitter handle)

As per a regulatory filing made by Zee Entertainment Enterprises Limited (ZEEL) to the stock exchange on Wednesday, its board of directors have cleared the merger of the media company with Sony Pictures Networks India, paving the way for the creation of India’s largest entertainment company. The two companies have, reportedly, entered into an exclusive and non-binding agreement. 

According to the terms of the deal, Sony will invest $1.575 billion (roughly Rs 11,627 crore) into ZEEL, effectively taking its stake in the merged property to 52.93 per cent. ZEEL shareholders will hold the remaining 47.07 per cent stake. As it stands, 96.01 per cent of ZEEL shareholding is public with 3.99 per cent held by promoters. The new entity’s nine-member board will now see the presence of five Sony executives even while Zee will retain its stock market listing in the country. 

With the merger going ahead, the new entity will become the largest entertainment network in India with a whopping 26 per cent share, leading the pack ahead of Star and Disney. The merged media network will straddle 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India) together. 

In a joint statement, the two companies said the deal will form “business synergies and given their relative strengths in scripted, factual and sports programming, respective distribution footprints across India and iconic entertainment brands, the combined company should be well-positioned to meet the growing consumer demand for premium content across entertainment touchpoints and platforms.” 

For the last couple of years, cash-strapped ZEEL has been seeking investors willing to infuse it with fresh capital. As its promoters fell on hard times, ZEEL sold an 11 per cent stake to Invesco Oppenheimer in August 2019 at Rs 400 per share. The sale saw Invesco Oppenheimer take its total shareholding in ZEEL to 18 per cent. 

The merger, it bears mentioning, arrives on the heels of Invesco Oppenheimer and OFI Global China Fund LLC calling for a reconstitution of the ZEEL Board, and specifically the ouster of ZEEL CEO Punit Goenka along with two other Board members. According to reports, the move was intended to rid ZEEL of the influence of the founding Subhash Chandra family over the company. 

But under the terms of the latest deal, Goenka will continue as the Managing Director and CEO of the merged entity although the Sony Group will reserve the rights to nominate the majority of the Board of Directors. Provisions in the term sheet also, reportedly, permit promoter Subhash Chandra family to increase its shareholding to 20 per cent from the current 4 per cent. 

According to a Times of India report, ZEEL has a presence in more than 173 countries reaching over 600 million people in India every week while Sony touches 700 million viewers in India with a presence in 167 countries. 

Additionally, although ZEEL has a larger network viewership share than Sony, its foothold lies primarily in regional general entertainment and movies. Sony, meanwhile, has a stronger presence in Hindi GEC and sports segments. Zee Entertainment, it is worth noting, had already sold its sports portfolio (Ten Sports) to SPNI in 2018. 

With the addition of ZEEL, SPNI has now added some 260,000 hours of TV content, the world’s largest Hindi film library and over 4,800 movie titles in different languages. 

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