Sony-Zee pens down definitive merger agreement

Following the merger, the new combined company will be listed on the Indian stock exchange.

Zee Entertainment Enterprises (ZEEL) and Sony Pictures Networks India (SPNI) have announced the signing of definitive agreements to merge both networks. The new association will combine digital assets, linear networks, programme libraries and production operations. Both the companies conducted mutual due diligence during the conclusion of an exclusive negotiation period to follow the agreement.

According to the terms of the definitive agreements, SPNI will be having a cash balance of $1.5 billion at closing which includes infusions from SPNI’s current shareholders and ZEEL’s promoter founders.

The combined company will be able to produce sharper content across platforms and can strengthen its name in the fast-moving digital ecosystem. Bid for media rights is rapidly growing in the sports business, the merger seems to be a viable option to chase fruitful broadcasting opportunities.

Following the merger, the new combined company will be listed on the Indian stock exchange. The transaction is subject to customary closing conditions, including regulatory, shareholder, and third-party approvals. Sony Pictures Entertainment Inc (SPE) will have to pay a non-compete fee to certain promoter founders of ZEEL as part of the agreement, which they will have to practice to infuse primary equity capital into SPNI. This means they will be acquiring SPNI shares around 2.11 per cent of the combined company’s shares on a post-closing basis.

After the closing, Sony will hold 50.86 per cent of the merged entity. Zee on the other hand will hold 45.15 per cent. The remaining 3.99 per cent will be with the ZEEL promoters.

The promoter founders of ZEEL have agreed to limit their equity in the combined company to 20% of its outstanding shares under the terms of the definitive agreement. This structure does not give them any pre-emptive or other rights to acquire equity in the combined company from the Sony Group, the combined company, or any other party.

Punit Goenka, CEO of ZEEL, will be the combined company’s Managing Director and CEO. The Sony Group will nominate the majority of the combined entity’s board of directors, which will include the current SPNI Managing Director and CEO, NP Singh.

SPE Chairman of Global Television Studios and SPE Corporate Development, Ravi Ahuja said, “Today marks an important step in our efforts to bring together some of the strongest leadership teams, content creators, and film libraries in the media business to create extraordinary entertainment and value for Indian consumers.”

SPNI MD and CEO, N.P. Singh, said, “The merger will create a company that’s “best in class and will redefine the contours of the media and entertainment industry.”

Mr Goenka, said, “The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms…This merger presents a significant opportunity to jointly take the businesses to the next level and drive substantial growth in the global arena.”

The merger was opposed by Invesco Developing Markets Fund along with OFI Global China Fund LLC, which owns about 17.9% of ZEEL. The shareholder in October had requested EGM to remove Goenka and two other directors and induct six new independent directors of their own choice but it got declined. ZEE further sought an injunction against the investor in the Supreme Court.

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