Who will win- Invesco or Zee?
3 min read
Reliance after hiatus at Big Bazar deal ended up at the same position with Zee. India’s biggest news and entertainment TV Group, Zee Entertainment Enterprises Ltd. has proposed a takeover by Reliance Industries. US-based investment firm Invesco that owns an 18% stake in the company had said to arrange the meetings in early 2021 between Reliance Industries and Zee founding family member and the MD of the company, Punit Goenka.
But Zee’s founder Subhash Chandra, father of Punit Goenka accused Invesco of a hostile takeover. Zee then started merger talks with the local unit of Japan’s Sony Group Corp. After which Invesco suggested the appointment of 6 new board members also suggesting the removal of current CEO Punit Goenka.
To consider the suggestions of Invesco, it also demanded an EGM on 11th September 2021 which was later declined by Zee. Invesco decided to take the matter to the Company Tribunal calling Zee’s behavior “oppressive”, where the tribunal demanded Zee’s comment on 8th October.
Zee is currently in talks with Sony for the take-over where Sony will be holding the majority stake and Goenka will continue as CEO of the merged entity and the existing CEO of Sony, NP Singh will continue as a member of the board.
Invesco claims that the Sony deal will help the founding family to increase their stake from just 4% to 20% based on which it is raising the corporate governance concerns. The story took a dramatic turn when Subhash Chandra made an appearance on the Zee news requesting Invesco to act as a shareholder and not as an owner with teary eyes.
On Tuesday, 12th October 2021, a letter written by Goenka was considered by the board where he mentioned that the deal was overvalued and lacked information on valuation and commercial terms.
In this letter he also clarifies two major points:
- Just like Sony, he was offered to continue as the MD and CEO by Reliance.
- His shareholding was increased to 7% from 4% even in the Reliance deal.
(Note: the name of Reliance was not disclosed by Goenka in the letter written)
He also mentioned few pointers like:
- The value of each share was inflated to Rs. 220
- The total valuation determined was Rs. 21,129 crores
- The investment determined was Rs. 14,000 crores for 60% holding
- Invesco had finalized the merger term and there was no scope of negotiation or due diligence.
He also claims in the letter that he offered a counter-proposal in place of a stock option that would increase Goenka’s holding but it was rejected. Reliance on Wednesday, 13th October 2021 commented that they regret being drawn in the dispute of Invesco and Zee.
They also claim that the proposal made by them was fairly valued and they did not resort to any hostile takeovers. In the merger of Zee and Sony, it is expected that the company will infuse Rs. 11,615 crores in Zee allowing 52.93% holding.
Together both the entity will be owning 75 TV channels, 2 video streaming services (Zee5 and Sony LIV), 2 film studios, and digital content. The non-binding term sheet provides an exclusive negotiation period of 90 days during which ZEE and SPN will conduct mutual diligence and negotiate definitive, binding agreements.
While the shareholders were getting Rs. 14,000 crores in the deal with Reliance, Zee yet opted for an Rs. 11,615 deal. Was this step taken just to increase their stake in the company?
