'Stock bounced back': Why Invesco has not made a complete exit from Zee
Why has the fund not chosen to sell out completely; the Zee-Sony merger might be the reason to see if the stock price can look up
- Oct 19, 2022,
- Updated Oct 19, 2022 1:14 PM IST
The Zee-Invesco relationship has been through several twist and turns. In a fresh development on Monday, the Atlanta-based fund sold a 5.5 per cent stake in the listed Zee Entertainment Enterprises Limited (Zee) through a block deal. At Rs 263.7 per share, it mopped up Rs 1,396 crore. Prior to this transaction, Invesco’s holding in Zee was 10.14 per cent.
The question on everyone’s lips is why the fund has not made a complete exit. This gets even more intriguing given the fund’s last block deal in April was at around Rs 280. “The stock since then has dipped considerably and was around Rs 200-220. Post July, it has started to bounce back. Maybe, Invesco felt this was a good price to offload the stock, though the current price is at a discount compared to that of April,” says Vivek Menon, Managing Partner at NV Capital, a media and entertainment credit fund.
Meanwhile, the proposed merger between Zee-Sony is underway. If it goes through, it will create a broadcasting monolith. “In spite of the conditional approval from CCI for the merger, Invesco has sold a substantial chunk of its portfolio in Zee. Looking at the trend, there is a good chance they will continue selling what remains in a staggered manner in the foreseeable future,” thinks Menon.
On the specific issue of why a complete exit was not made, his view is that that would have been the case had the stock been well above the current levels. “They could now be in a wait-and-watch mode to see how the stock moves post the merger. More importantly, the market should be able to absorb the large quantity that Invesco was offloading as it could have had an impact on the stock price.” A response from Invesco on a query from Business Today on why a complete exit was not made is awaited.
It was in mid-2019 when Invesco-Oppenheimer, a global fund, decided to pick up a 11 per cent stake for Rs 4,224 crore in the Subhash Chandra-promoted Zee, at a time when the stock was getting battered. The money that came in was crucial since Chandra's Essel Group was saddled with a debt of Rs 13,000 crore and a potential default to the extent of Rs 7,000 crore was barely a month away.
That deal took Invesco-Oppenheimer’s holding in Zee to 18 per cent; the first lot of 7.74 per cent was picked up by Oppenheimer in 2002 and more in May 2017. Eventually, the fund was acquired by Invesco, now Atlanta-headquartered, for close to $6 billion. Last year, the relationship between Invesco and Zee had deteriorated to a point where the former had even asked for the removal of the directors from Zee’s board.
Also read: ZEE Entertainment jumps 6% amid Rs 1,396 crore block deals
The Zee-Invesco relationship has been through several twist and turns. In a fresh development on Monday, the Atlanta-based fund sold a 5.5 per cent stake in the listed Zee Entertainment Enterprises Limited (Zee) through a block deal. At Rs 263.7 per share, it mopped up Rs 1,396 crore. Prior to this transaction, Invesco’s holding in Zee was 10.14 per cent.
The question on everyone’s lips is why the fund has not made a complete exit. This gets even more intriguing given the fund’s last block deal in April was at around Rs 280. “The stock since then has dipped considerably and was around Rs 200-220. Post July, it has started to bounce back. Maybe, Invesco felt this was a good price to offload the stock, though the current price is at a discount compared to that of April,” says Vivek Menon, Managing Partner at NV Capital, a media and entertainment credit fund.
Meanwhile, the proposed merger between Zee-Sony is underway. If it goes through, it will create a broadcasting monolith. “In spite of the conditional approval from CCI for the merger, Invesco has sold a substantial chunk of its portfolio in Zee. Looking at the trend, there is a good chance they will continue selling what remains in a staggered manner in the foreseeable future,” thinks Menon.
On the specific issue of why a complete exit was not made, his view is that that would have been the case had the stock been well above the current levels. “They could now be in a wait-and-watch mode to see how the stock moves post the merger. More importantly, the market should be able to absorb the large quantity that Invesco was offloading as it could have had an impact on the stock price.” A response from Invesco on a query from Business Today on why a complete exit was not made is awaited.
It was in mid-2019 when Invesco-Oppenheimer, a global fund, decided to pick up a 11 per cent stake for Rs 4,224 crore in the Subhash Chandra-promoted Zee, at a time when the stock was getting battered. The money that came in was crucial since Chandra's Essel Group was saddled with a debt of Rs 13,000 crore and a potential default to the extent of Rs 7,000 crore was barely a month away.
That deal took Invesco-Oppenheimer’s holding in Zee to 18 per cent; the first lot of 7.74 per cent was picked up by Oppenheimer in 2002 and more in May 2017. Eventually, the fund was acquired by Invesco, now Atlanta-headquartered, for close to $6 billion. Last year, the relationship between Invesco and Zee had deteriorated to a point where the former had even asked for the removal of the directors from Zee’s board.
Also read: ZEE Entertainment jumps 6% amid Rs 1,396 crore block deals