The deadlock around Japanese conglomerate Sony Corp’s move to merge its Indian subsidiary Sony Pictures Networks India with homegrown TV channel Zee Entertainment has eased with the latter’s largest shareholder opting against litigation to block the merger.
Invesco Developing Markets Fund, which owns an 18% stake in Zee Entertainment, has decided to back the Zee merger with Sony and withdraw its requisition notice, which sought the removal of managing director and CEO Punit Goenka from Zee’s board. This comes days after Invesco won its appeal against Zee Entertainment in the Bombay High Court.
However, the US investment company said it will continue to monitor the proposed merger’s progress. If the merger is not completed as currently proposed, Invesco retains the right to requisition a fresh extraordinary general meeting (EGM) of shareholders, it said.
Zee Entertainment, however, has three weeks’ time to move the Supreme Court to appeal against the Bombay High Court order.
In a statement, Invesco said, “We continue to believe this deal in its current form has great potential for Zee shareholders. We also recognize that, following the merger’s consummation, the board of the newly combined company will be substantially reconstituted, which will achieve our objective of strengthening board oversight of the company.”
Prior to the merger, Invesco had called for requisitioning an EGM and adding six independent directors to Zee’s board of directors. It had also sought the removal of three directors from Zee’s Board, including Goenka.
According to the proposed merger deal, Sony Pictures Networks India will now hold 50.86% in the merged entity while Zee Entertainment will hold 3.99%. The public shareholding will be 45.15%.
Despite its low shareholding, Zee’s founding family will continue to be in the outfit’s driver’s seat. The merged entity will be led by Goenka while a majority of the board of directors will be nominated by the Sony Group.
The combined entity will be India’s second-largest entertainment firm, with 75 TV channels and annual revenue of about 140 billion rupees (US$1.8 billion). Mumbai-based Star India, a wholly-owned subsidiary of The Walt Disney Company India, is the leading player.