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ZEE largest Investor Invesco about to sell 7.8% stake

ZEE largest Investor Invesco about to sell 7.8% stake

Invesco (an investment firm) Developing Market Funds, embroiled in a boardroom struggle with Zee Entertainment Enterprises Ltd until recently, had chosen to cut its stake in the latter via a block sale. Invesco, which, together with OFI Global China Fund LLC, owns 17.88 per cent of Zee, will sell up to 7.8% of the shares. According to the report, the company would sell 7.4 crore shares valued at roughly Rs 2,200 crore.

The price is expected to range between Rs 270 and Rs 290 per share, with Kotak Mahindra Bank serving as the block deal’s banker.

The news comes less than two weeks after Invesco suspended its demand for an extraordinary general meeting (EGM), which it had been seeking since September 2021, to force a reorganization of Zee’s board of directors. They also wanted Punit Goenka, the company’s managing director, to be fired during the EGM.

Invesco stated in a statement on March 23 that it has chosen not to pursue the EGM to add six independent directors since Zee’s merger with Sony will meet the fund’s goal of improving board governance. The market reacted favourably to the news, with Zee’s shares rising nearly 16% in the morning session on March 24.

ZEEL-Invesco case: Reliance confirms merger proposal with Zee included  continuation of Punit Goenka as MD & CEOInvesco has not said how much they would sell their shareholding, but industry analysts estimate it will be between 270 and 290 dollars per share. On Wednesday, Zee Entertainment shares finished at 292 on the NSE.

According to Shriram Subramanian, MD of InGovern Research Services, a corporate governance consultancy business, “Given that Invesco is selling such a large block of shares in one go, it is probable that the shares would be sold at a reduced price.” Subramanian further said that these shares would be in high demand among investors.

Invesco wants changes.

Invesco has been fighting the Zee promoters in court for the last year. Invesco wanted the Sony merger to be authorized by a new board of directors independent of promoter influence. They also intended to remove Punit Goenka, its MD and CEO, from the board of directors.

The Bombay High Court first denied their plea for an emergency meeting, just as both Zee and Sony’s boards announced that they had accepted their non-binding merger deal sheet.

After the board of directors of Zee and Sony accepted their intention to combine the two media companies, the feud cooled down. While market observers feel this indicates that the American investment fund isn’t very enthused about the merger, Invesco has said that the Zee-Sony acquisition in its current shape has significant potential for shareholders.

Home | Invesco Ltd.According to Karan Taurani of Elara Capital, Invesco is selling a portion of its stock since it isn’t sure that the Zee-Sony combination would clear regulatory obstacles. Furthermore, they may not want Punit Goenka to be the combined company’s CEO.

What did Invesco have to say?

“Since we announced our intention to requisition, Zee has entered into a merger agreement with Sony.” We continue to believe that this deal, in its current form, provides exceptional value to Zee shareholders. “We also realize that the newly combined firm’s board of directors will be significantly reshaped after the merger, accomplishing our aim of enhancing board oversight of the business,” Invesco stated.

Sony has reached an agreement.

ZEEL To Merge With SONY Pictures Networks India After Board Gives  In-Principle Approval“Funds managed by Invesco’s Developing Markets investment team, including Invesco Developing Markets Fund, will continue to own at least 11 percent of Zee after the bookbuild is completed, underscoring the investment team’s faith that the Sony deal in its current form has huge potential for Zee shareholders,” the company said in a statement.

The merger of Sony and Zee

Zee announced its intention to combine with Sony on September 22, and the agreement was completed three months later. Sony will own 50.86 per cent of the combined company, while Zee’s promoters own 3.99 per cent. Zee’s other stockholders will own the remaining 45.15 per cent. However, this is just the beginning of a lengthy process that will include obtaining clearances at several levels, dealing with an enraged Invesco, Zee’s biggest shareholder, and the reality that both companies need each other in a challenging environment growth is scarce.

Both firms have had a rough patch in recent months. With Zee’s promoters having minimal negotiating leverage, the company struggled to answer tough questions from Invesco (see Diminishing Stake). With a huge debt (about Rs 11,000 crore at the group holding company level), Zee could only do so much. Viacom18 was also considered, but the transaction fell through. “In this situation, Sony has acted as the white knight,” says Vivek Menon, Managing Partner of NV Capital, a media and entertainment credit firm. Goenka’s expertise in television (he became MD & CEO in 2008) is valuable to him, mainly because “he learned the ropes from his father.”

Zee Entertainment-Sony merger approved, new combined entity to be listed in  IndiaSony isn’t doing so well in India, either. The network televised the Indian Premier League (IPL), the country’s main cricket competition, until 2017. Its sales almost quadrupled from Rs 3,342 crore to Rs 6,277 crore between FY15 and FY18, while its net profit increased six times. However, when Star & Disney India (formerly Star India) won the IPL broadcasting rights in September 2017, Sony’s revenue remained flat (Rs 5,640 crore in FY21). Still, net profit fell to Rs 564 crore from Rs 976 million in FY20.

A broadcasting network’s revenue comes from a limited number of channels. Advertising accounted for 46 per cent of Sony’s revenue (Rs 2,563 crore), subscriptions for 42 per cent (Rs 2,329 crore), and licensing for the rest, according to its annual report for FY21 received from the Registrar of Companies (its Indian companies are unlisted). This is where a closer look at the advertising revenue figures is necessary. According to industry analysts, the company’s major channel, Sony Entertainment Television, earns over Rs 1,000 crore each year (Zee’s main channel, Zee TV, also earns that much). In comparison, Sony SAB and Sony Max earn roughly Rs 450 crore and Rs 375 crore, respectively.

Edited by Prakriti Arora

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