US-based investment management company Invesco Oppenheimer has increased its shareholding in Zee Entertainment Enterprises Limited, a unit of Essel Group, by picking up an 11% promoter’s stake for 42.24 billion rupees (US$ 608 million).
Invesco Oppenheimer previously held a 7.74% stake in Zee. Now it has risen to 18.74%.
Essel Group, an Indian conglomerate with interests in media, packaging and infrastructure, is promoted by Subhash Chandra, who is also a member of the Upper House of Parliament. It runs Zee Entertainment Network, India’s largest private broadcaster.
The company has a debt of 110 billion rupees ($1.59 billion) and lenders have given it time until September 30 to pare that debt. An agreement in this regard was signed with lenders in February.
The Invesco Oppenheimer deal, at 400 rupees per share, values Zee at a premium of 10.6% over the current market price and will be used to pay off part of the promoter-level debt. After tax the deal will be valued at 40 billion rupees ($579 million), Business Standard reports.
After the deal, the promoter stake in Zee will fall to just under 25% from nearly 36%. However, during an analyst call Puneet Goenka, CEO and MD of Zee Entertainment Network, said that despite an increase in shareholding Invesco Oppenheimer will not hold a board seat in the company.
He also said that Zee chose to go ahead with the offer from the financial investor rather than a strategic investor because deadlines were close. “An investment by a strategic partner would have taken longer than the September 30 deadline that we’ve given to lenders for debt repayment,” he clarified.
Along with selling a stake in the broadcaster, Essel Group is also in the process of divesting some of its non-media assets. It is working out deals with prospective investors for its infrastructure assets in roads, solar and power transmission.
Goenka claimed the sale of non-media assets would conclude in the next few weeks. “We may have to sell a small additional stake in Zee if needed,” he added.
Shares of Zee Entertainment Enterprises Limited suffered a hammering in January following reports of Essel group’s link with a company allegedly involved in money laundering. The company’s lenders, comprising banks, mutual funds and non-banking financial companies, were threatening to invoke their right to offload shares pledged by Zee promoters to get loans.
An agreement was later reached with lenders whereby Zee was given until September 30 to repay the debt and the lenders agreed not to sell pledged shares.