Invesco Oppenheimer Developing Markets Fund has agreed to buy 11 per cent stake in Zee Entertainment Enterprises Ltd (ZEEL) for Rs 4,224 crore. The stake sale has come through at a 10 per cent premium, lower than the 15-20 per cent premium that the market was speculating.
In fact, the news doing the rounds till yesterday was that Zee was on the verge of signing on the dotted line with a consortium led by American cable major, Comcast, Blackstone and James Murdoch's Luca Systems. The Comcast-led consortium which reportedly offered to buy a 26% stake in the company had wanted the promoters to exit.
The deal with Invesco has surely proved to be a sweet deal for the promoters, Subhash Chandra and Punit Goenka, as it has allowed them to stay on and run the business. Though the industry was expecting a 26 per cent dilution of stake, a Zee insider in an earlier interview with Business Today had said that the promoters had been wondering whether they actually needed to dilute a large percentage of their stake, as sister concern, Essel Infrastructure (which has debts to the tune of Rs 11,400 crore) had sold three of its road projects in MP, Karnataka and Telangana for around Rs 3,500 crore. It is also known to have sold its power assets to Edelweiss for Rs 2,500 crore. The company's negotiation power has further gone up with these sale announcements, the insider had said.
The proceeds from the stake sale will be utilised to pay off the debt in the name of various Essel Group companies. The conglomerate has a total debt of Rs 13,000 crore. The company is also supposed to pay back Rs 7,000 crore to mutual fund investors in September.
The Invesco Oppenheimer fund has a long history as a financial investor in India and has been a financial investor in Zee Entertainment since 2002, Essel Group said in a press statement.
"Essel Group had initiated the process of divesting its key assets, with an aim to repay all the lenders by September 2019. During this divestment process, the Group has received positive response from multiple partners expressing interest to buy the stake in ZEEL and the other key Non Media Assets," the company said in a statement.
"I'm extremely glad to share that the Fund as a Financial Investor has further reposed its faith in ZEEL. It also gives me immense pleasure to note their strong belief and trust in the intrinsic value of our precious asset. It is the valuable belief and support of our esteemed financial investors that enables us to consistently generate great value, year after year," said ZEEL CEO and Managing Director Punit Goenka.