Zee Entertainment, Sony Pictures set-for merger

New Delhi: Zee Entertainment and Sony Pictures on Wednesday said they have received in-principle approval for a merger that will combine both companies' linear networks, digital assets, production operations and program libraries.

Further, Zee Entertainment Enterprises Ltd (ZEEL) MD and CEO Punit Goenka will lead the merged entity. Sony Pictures Networks India (SPNI) said the merger would bring together two leading Indian media network businesses, benefitting consumers throughout India across content genres, from film to sports. "The combined company is expected to benefit all stakeholders given strong synergies between ZEEL and SPNI," said SPNI.

As per the deal, the shareholders of SPNI will hold majority stake in the merged entity. This exclusive, non-binding pact to combine both companies' assets will 'enhance the combined company's digital platforms across technology and content, ability to bid for broadcasting rights in the fast-growing sports landscape and pursue other growth opportunities," said SPNI.

Further, Sony Pictures Entertainment, the parent company of SPNI, would invest growth capital so that SPNI has a cash balance of approximately $1.575 billion, SPNI said in a statement.According to ZEEL, basing the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25 per cent in favour of ZEEL. "However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07 per cent of the merged entity to be held by ZEEL shareholders and the balance 52.93 per cent of the merged entity to be held by SPNI shareholders," it said.

It also added that Punit Goenka, who is facing pressure from two largest shareholders of the company, Invesco and OFI Global China Fund LLCto quit the post, would lead the merged entity. Last week, the two investment firmswhich together hold 17.88 per cent of the paid-up share capital of the company that carries the right of votinghad called an extraordinary general meeting of shareholders seeking to remove Goenka from the position.

"The combined company's board of directors would include directors nominated by Sony Group and result in Sony Group having the right to nominate the majority of the board members," said SPN statement.