The Competition Commission of India (CCI) feels a merger between Sony Pictures Networks India (Sony India/SPNI) and Zee Entertainment Enterprises Ltd (ZEEL) to create a US$10bn (billion) TV enterprise will potentially hurt competition by having 'unparalleled bargaining power',
says a report by Reuters.
CCI sent a notice to the two companies on 3 August 2022. Quoting from the notice, the report says the initial review of CCI shows the proposed deal would place the combined entity in a strong position with around 92 channels in India, also citing Sony's global revenue of US$86bn and assets of US$211bn.
"Such apparently humongous market position would enable the combined entity to enjoy an unparalleled bargaining power," CCI said in its notice, adding the combined entity could increase the price of channel packages.
"The initial review shows the deal is likely to cause an appreciable adverse effect on competition, the watchdog said. Thus, it is considered appropriate to conduct further inquiry into the matter," Reuters says in the report.
According to the report, the preliminary assessment by CCI also showed that the merged entity would have a share of around 45% of the Hindi language segment, which draws the largest audience in the country, with Disney's Star India network a distant second. This would further concentrate such segments at the cost of the competition, CCI said in its notice.
Sony and Zee had already responded in June and July to two so-called defect letters issued by CCI inquiring about the deal.
After analysing submissions related to advertising revenue, CCI said the merged entity was likely to use its strong market position to increase the price of some advertisements. "The combined strength of the parties is likely to be used to entrench their presence and earn higher profits," the report says, quoting from the notice issued by CCI.
In December last year, both companies signed a definitive agreement to merge ZEEL with Sony India and combine their linear networks, digital assets, production operations and programme libraries.
"Under the terms of the definitive agreements, SPNI will have cash balance of $1.5 billion 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," a joint statement said.
"After the closing, Sony Pictures Entertainment Inc (SPE) will indirectly hold a majority 50.86% of the combined company, the promoters (founders) of ZEEL will hold 3.99%, and the other ZEEL shareholders will hold a 45.15% stake."
After opposing the deal, in April this year, three funds managed by Invesco's developing markets investment team, including Invesco Developing Markets Fund, decided to sell up to 7.8% of their stake in ZEEL. While reducing its stake to 11%, Invesco reaffirmed its support for the merger of Zee with Sony India. Invesco also dropped its demand of removal of Punit Goenka as managing director (MD) and chief executive officer (CEO) of ZEEL, while withdrawing its requisition notice for an extraordinary general meeting (EGM).
Jawahar Goel To Exit from Dish TV as Director Too
Separately, Jawahar Goel, the younger brother of Essel group founder Subhash Chandra, has agreed to step down as a director at Dish TV India Ltd’s annual general meeting (AGM) scheduled on 26 September 2022.
On 31 August 2022, Dish TV informed the exchanges that Mr Goel, a non-retiring director, will not seek re-appointment as a director in the upcoming AGM. In a separate notice, the satellite TV provider also said that the board had agreed to induct Sunil Kumar Gupta, Uday Kumar Varma and Haripriya Padmanabhan as independent directors after the information and broadcasting ministry approves their candidature.
It may be recalled that these three people were part of the seven directors Yes Bank had proposed in its letter dated 5 September 2021 when, alleging corporate misgovernance, it sought reconstitution of Dish TV’s board. These recommendations to the board connote that Dish TV has agreed to induct three members recommended by the Bank and three directors nominated by the company. This marks a victory for Yes Bank after its year-long campaign to oust Mr Goel from the board of Dish TV.
Subhash Chandra had borrowed over Rs5,270 crore from Yes Bank and his inability to service the loans made the lender invoke Dish TV shares that were pledged with the lender. At its extraordinary general meeting (EGM) held earlier in June, shareholders of the direct-to-home satellite service-provider had rejected Mr Goel’s reappointment. He has been continuing as a non-executive director at the company.
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