Zee-Sony Merger Deal: Sony To Hold Majority Stake, Zee's Punit Goenka To Head The Merged Entity

Zee Entertainment Enterprises Ltd. (ZEE) and Sony Pictures Networks India Pvt Ltd. (SPN), a subsidiary of Sony Pictures Entertainment (SPE), announced on Wednesday (22 December) that they have signed definitive agreements to merge ZEE and SPN, combining their linear networks, digital assets, production operations, as well as programme libraries.

Punit Goenka, ZEE's managing director and CEO, will oversee the merged entity. The Sony Group will nominate the majority of the combined company's board of directors, which will include existing SPN Managing Director and CEO NP Singh.

As Chairman of Sony Pictures India, Singh will take on a bigger executive role at SPE and he will report to Ravi Ahuja, who is the chairman of Global Television Studios and SPE corporate.

According to reports, the latest agreement follows the conclusion of a discussion phase during which ZEE and SPN completed reciprocal due diligence. The new combined business will be listed on the Indian stock exchange after the merger is completed. Regulatory, shareholder and third-party clearances are all required for the transaction to close.

The merged business, which will operate 75 television stations, two video streaming services, two film studios, and a digital content studio, is expected to be a powerful contender, according to media analysts.

Goenka said in a statement: “It is a significant milestone for all of us, as two leading media and entertainment companies join hands to drive the next era of entertainment filled with immense opportunities. The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms."

Meanwhile, Karan Taurani, who is the senior vice-president of Elara Capital Ltd, said that the merger will result in favourable cost synergies for the television business, as well as increased profitability and a strong content offering on the digital front, with a wide range of options now available on ZEE5 and SonyLIV, the two companies' respective OTT platforms.

Additionally, he said: “The negative impact of NTO 2.0 (the new tariff order brought in by the Telecom Regulatory Authority of India) will be relatively subdued for ZEEL-Sony as an entity as they can efficiently bundle their best channels, thus enjoying an edge over the competition."

However, Taurani expects their combined digital business to reach Rs 91 billion by FY2024, with the potential for the revenues to grow as a significant shift to SVoD (subscription video-on-demand), emerges in the coming years.

Reports noted that Zee now owns 96.05 crore shares, which will increase to 173.63 crores after the merger. The non-compete is likely to net the promoters more than Rs 1,000 crore. To maintain their 3.99 per cent stake, the promoters will purchase over 3.67 crore shares in the amalgamated business at Rs 300 per share.

According to the terms of the agreement, SPE Mauritius Investments Limited — which belongs to Sony Group — will pay Essel an amount equivalent to nearly Rs 1,000 crore in USD for the non-compete obligations.

Additionally, Zee's promoters have pledged to own no more than 20 per cent of the company's outstanding shares. Moreover, the promoters and founders will not have the right to acquire equity in the combined business from the Sony Group.