The logo of Japan's Sony on the wall of the company's headquarters in Tokyo on August 4, 2020. Photo: AFP / Kazuhiro Nogi

Japanese conglomerate Sony Corp’s Indian subsidiary Sony Pictures Networks India has agreed to acquire Zee Entertainment, a 30-year-old homegrown private television entertainment pioneer that operates in English, Hindi and many other Indian languages.

Zee Entertainment has been battling an internal governance crisis with its largest stakeholder Invesco calling for the removal of the current CEO Punit Goenka. In recent days, several Zee shareholders have also asked for the termination of Goenka and other top officials.

With Sony allowing him to continue as the chief of the merged entity, Goenka has neutralized the Invesco threat.

As per the merger terms, Sony’s subsidiary will hold a majority stake and have the power to nominate a majority of directors. The current CEO of Sony Pictures, N P Singh, will remain on the company board.

The two firms will conduct due diligence and finalize a definitive agreement in 90 days. The promoters of the two companies will also sign certain non-compete arrangements as part of the transaction.

The combined entity will be one of the largest entertainment networks in the country with 75 TV channels, two video streaming services, two film studios, and a digital content studio. They have an employee headcount of over 4,000 and more than 136 billion rupees (US$1.84 billion) in revenue.

A Sony Pictures statement said, “The combined entity would be a publicly listed company in India and be better positioned to lead the consumer transition from traditional pay-TV into the digital future.”

This merger would bring together two leading Indian media network businesses, benefitting consumers throughout India across content genres from film to sports, it added.

Sony began its operations in India in 1995 and already has a strong presence in the country’s television entertainment sector. It has produced many popular TV shows.

Markets enthused over the Zee-Sony merger news. The stocks of Zee Entertainment hit an upper circuit of 20% at 3.06 billion rupees on the Bombay Stock Exchange on Wednesday, marking a 52-week high.

This is not the first time Sony has tried to acquire Zee. In 2019, when Zee was facing a debt crisis, Sony was shortlisted for a stake sale but the talks failed. Zee sold an 11% stake to US-based Invesco instead.