It currently faces intense competition from the market leader Star & Disney India.
Zee Entertainment Enterprises Limited (ZEEL) is merging with Sony Pictures Networks India (SPNI).
Post merger, Sony will invest $1.57 billion and will become the majority shareholder with 52.93% controlling stake.
The shareholders of ZEEL will hold 47.07% stake.
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CEO Retains Position
Puneet Goenka will remain the Managing Director and CEO of the merged entity, having successfully defeated Invesco’s attempt to get him off the Board.
Invesco and OFI Global, two of ZEE’s largest shareholders, had recently called for an Extraordinary General Meeting (EGM) seeking the removal of Punit Goenka and two others from the board.
They wanted to appoint six independent directors to the board.
They had cited corporate governance concerns behind their motives.
Goenka will be in the position for 5 years.
Next Steps
As a majority shareholder, Sony Group will have the right to nominate majority directors on the board of the merged entity.
Zee’s promoter family will be free to increase its shareholding from the current 4% to up to 20%
Both parties have entered into a non-binding agreement and will combine their linear networks, digital assets, production operations and program libraries.
The merged entity will remain a listed company.
During a period of 90 days, both firms will conduct mutual diligence and finalize definitive agreements.
Importance Of The Deal
The ZEEL board which approved the merger said that it was interested in the strategic value the partner brings to the table.
The merger should also help achieve higher growth and profitability as a major media and entertainment company across South Asia.
It would also combine both companies’ selective strengths to increase shareholder value multifold.
ZEE’s Contribution
ZEEL comes in with its 3 decades-long expertise in content creation and customer bonds.
It dominates in regional genres, something which Sony lacks.
The OTT platform ZEE5 has around four to five million paid users.
Sony’s Contribution
SPNI pitches in by way of its success across entertainment genres and its international catalog.
It has a strong presence in sports and mainstream shows such as Scam 1992.
The company’s OTT app Sony LIV has around 6.8 million subscribers.
Tackling Competition
It currently faces intense competition from the market leader Star & Disney India.
An overhaul of the merged entity’s digital offerings could be around the corner in order to enable multiple re-rating for the company.
Both could leverage their extensive movie catalogues which can be repurposed for OTT and TV offerings.
Disney+Hotstar has 35.1 million subscribers which is expected to rise to 46 million by the end of this year.
If they succeed in their ambitions, they could potentially become the second largest homegrown OTT in India after Disney+Hotstar.
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