Sony Pictures, Zee Ent sign deal to merge

Mumbai: Sony Pictures Networks India Private Limited (SPNI) and Zee Entertainment Enterprises Ltd (ZEEL) on Wednesday announced that they have signed definitive agreements to merge ZEEL with and into SPNI and combine their linear networks, digital assets, production operations and program libraries. The combined entity will have total 75 channels and 26 per cent viewership in India.

The agreements follow the conclusion of an exclusive negotiation period during which ZEEL and SPNI conducted mutual due diligence. After closing, the new combined company will be publicly listed in India. The closing of the transaction is subject to certain customary closing conditions, including regulatory, shareholder, and third-party approvals.

Under the terms of the definitive agreements, SPNI will have cash balance of $1.5 billion (assuming an INR:$exchange rate of 75:1) at closing, including through infusion by the current shareholders of SPNI and the promoters (founders) of ZEEL, to enable the combined company to drive sharper content creation across platforms, strengthen its footprint in the rapidly evolving digital ecosystem, bid for media rights in the fast-growing sports landscape and pursue other growth opportunities.

SPNI is an indirect subsidiary of Sony Pictures Entertainment Inc. (SPE). Under the transactions contemplated by a non-compete agreement, SPE, through a subsidiary, will pay a non-compete fee to certain promoters (founders) of ZEEL, which will be used by such promoters (founders) to infuse primary equity capital into SPNI, entitling the promoters (founders) of ZEEL to acquire shares of SPNI, which would eventually equal approximately 2.11 per cent of the shares of the combined company on a post-closing basis. After the closing, SPE will indirectly hold a majority 50.86 per cent of the combined company, the promoters (founders) of ZEEL will hold 3.99 per cent, and the other ZEEL shareholders will hold a 45.15 per cent stake.

Punit Goenka will lead the combined company as its Managing Director and CEO. The majority of the board of directors of the combined company will be nominated by the Sony Group and will include the current SPNI Managing Director and CEO, NP Singh. On closing, Singh will assume a broader executive position at SPE as Chairman, Sony Pictures India (a division of SPE) reporting to Ravi Ahuja, SPE's Chairman of Global Television Studios and SPE Corporate Development.

Punit Goenka, MD & CEO, ZEE Entertainment Enterprises said: "The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms." Goenka said that sports will be one of the key drivers for Sony, whereas oTT platform will be another key strategy the merged entity will follow. He maintained that IPL was one of the key properties available in market.

Commenting on it, Credit Susse said that the move addresses concerns on governance. Merged business to be led by Punit Goenka as MD but Sony to appoint majority of board, it added. According to Credit Susse, the combined entity will be much stronger operationally with $2 billion in revenue.

Merged entity would be in a better position to compete on streaming with a treasury of $1.5 billion. Sony will contribute its existing assets and also infuse Rs 79.5 billion into the entity, giving it a 50.8 per cent share.

Zee-Sony Merger