Things at Zee Entertainment Enterprises Ltd (ZEEL) seem to be moving too fast and strangely. Days after the company’s largest shareholder called for an extraordinary general meeting (EGM) to remove Punit Goenka as managing director (MD), the board of directors of Zee Entertainment has approved the company's merger with Sony Pictures Network India (Sony India).
In a regulatory filing, ZEEL says, “The indicative initial merger ratio is expected to result in the shareholders of the company holding around 47.07% in the merged company and the promoters of Sony India holding about 52.93% in the merged company, post-infusion of growth capital into Sony India as part of the merger such that Sony India has a cash balance of about $1.575 billion.”
“As part of the transaction, Punit Goenka will continue to be the MD and chief executive (CEO) of the merged entity for five years. Further certain non-compete arrangements will be agreed upon between the promoters of ZEEL and SPNI," it added.
According to the term sheet, the promoter family is free to increase its shareholding up to 20% from the current at about 4% in a manner in accordance with the applicable law. "The Sony group will nominate the majority of the board of directors of the merged entity,” it added.
On the basis on the existing equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25% in favour of ZEEL, the company says, adding, “However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07% of the merged entity to be held by ZEEL shareholders and balance 52.93% of the merged entity to be held by SPNI shareholders.”
According to ZEEL, the company entered a non-binding term sheet with SPNI to combine linear networks, digital assets, production operations and programme libraries.
Last week, Invesco Developing Markets Fund (formerly Invesco Oppenheimer Developing Markets Fund) and OFI Global China Fund LLC, which hold 18% stake, called for an EGM to remove Mr Goenka, and two directors Ashok Kurien and Manish Chokhani. However, before the company’s annual general meeting (AGM), both Mr Kurien and Mr Chokhani resigned.
Earlier this month, while raising severe corporate governance concerns in ZEEL, proxy advisory firm Institutional Investors Advisory Services (IiAS) asked shareholders not to vote for re-appointing Mr Kurien and Mr Chokhani on the Zee Entertainment board at the AGM. However, both these independent directors resigned before the AGM.
In calling for an EGM, Invesco Developing Markets Fund and OFI Global China Fund llC wanted to pass three resolutions to remove Mr Goenka and the two independent directors from Zee Entertainment board. At the same time, the Funds wish to appoint six of their nominees, namely, Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli and Gaurav Mehta, on the company board as independent directors. (Read: Zee Entertainment: Invesco, OFI Global China Fund Call for EGM To Remove Punit Goenka from Board
With the board of ZEEL approving the merger plan with Sony India, it would be interesting to see how Invesco Developing Markets Fund and OFI Global China Fund LLC would react to the development.
At 9.59am Wednesday, ZEEL was trading 20% higher at Rs306.75 on the BSE, while the 30-share Sensex was up 78 points to 59083.96 points.