Zee Entertainment inks deal for merger with Sony Pictures India


Zee Entertainment inks deal for merger with Sony Pictures India

The Board of Directors of ZEE Entertainment Enterprises Limited (ZEEL) generally provided an in-principle approval for the merger between Sony Pictures Networks India (SPNI) & ZEEL.

SPNI would also pervade growth capital into SPNI as part of the merger such that SPNI has approximately $1.575 billion at closing, for pursuing other growth opportunities.

Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25% in favour of ZEEL. Nevertheless, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07% of the merged entity being held by ZEEL shareholders and the enduring 52.93% of the merged entity being held by SPNI shareholders.

In a statement, Zee stated its board has evaluated the merger not only on financial parameters, but also on the strategic value which Sony brings to the table. The board concluded that the merger will be in the best interest of all the shareholders & stakeholders. The merger is in line with ZEEL's strategy of accomplishing higher growth and profitability as a leading media & entertainment company across South Asia. The board has authorised the management of ZEEL to initiate the needed due diligence process.

The shareholders of Sony will hold a majority stake in the merged entity. The shareholders of ZEEL & SPNI have joined into a non-binding term sheet to combine both firms' linear networks, digital assets, production operations and program libraries.

The term sheet provides an exclusive period of 90 days during which ZEEL and SPNI will conduct mutual diligence and settle definitive agreement. The merged assest will be a publicly listed company in India.

As part of the transaction, Punit Goenka will persist to be the managing director and CEO of the merged entity. Further, certain non-compete arrangements will be approved upon between the promoters of ZEEL and the promoters of SPNI. As per the term sheet, the promoter family is free to increase its shareholding from the current 4% to up to 20%, in a manner that is in accordance with applicable law. A majority of the board members of the merged entity will be nominated by the Sony Group.

It is expected that the final transaction would be subject to completion of customary due diligence and execution of definitive agreements and needed corporate, regulatory and third-party approvals, consisting the votes of ZEEL's shareholders.

ZEEL's strong expertise in content creation and its deep consumer connect built over the last 3 decades, coupled with SPNI's success across entertainment genres (including gaming and sports) will add major value to the merged entity and its management team, thereby increasing shareholder value multifold.

R Gopalan, chairman, ZEE Entertainment Enterprises Ltd, stated, "The Board of Directors at ZEEL have conducted a strategic review of the merger proposal between SPNI and ZEEL. As a Board that encompasses a blend of highly accomplished professionals having rich expertise across varied sectors, we always keep in mind the best interests of the shareholders."