Zee Entertainment's merger with Sony's local unit is poised to go ahead. Image: Facebook

US investor Invesco Developing Market Funds has decided to reduce its stake in Zee Entertainment Enterprises, further ascertaining its faith in the proposed merger with Sony’s India arm – Sony Pictures Networks India.

Invesco was the largest shareholder in Zee Entertainment with an 18.8% stake in the company, and it now plans to sell a 7.8% stake for 21.72 billion rupees (US$286 million). It has mandated Kotak Securities to sell 75 million Zee shares via a block deal on Thursday.

“We continue to believe this deal in its current form has great potential for Zee shareholders. We also recognize that, following the merger, the board of the newly combined company will be substantially reconstituted, which will achieve our objective of strengthening board oversight of the company,” Invesco has said.

The move come two weeks after Invesco withdrew its demand to oust Managing Director Punit Goenka from the company. Invesco had earlier won its appeal against Zee Entertainment in the Bombay High Court to hold a meeting seeking the removal. Punit Goenka is the son of Zee Entertainment founder Subhash Chandra, who set up the company in 1992.

In September last year, Invesco had asked for an extraordinary general meeting to remove Punit Goenka and induct six independent directors on the Zee Entertainment board.

According to the proposed merger deal, Sony Pictures Networks India will now hold 50.86% of 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 driver’s seat of the merged entity. It 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 ($1.8 billion). Mumbai-based Star India, a wholly-owned subsidiary of The Walt Disney Company India, is the leading player.