Zee-Sony merger: After NCLT nod, top industry watchers give big thumbs up to the merger

The go-ahead from the National Company Law Tribunal (NCLT) for the merger between Zee Entertainment Enterprises (ZEEL) and Sony Pictures Network India (now called Culver Max Entertainment) is being viewed as a positive step ahead by analysts and industry trackers. The combined entity, with 75 channels, two OTT platforms and two studios, and a strong presence in varied genres such as entertainment and sports, and in the regional markets, makes it the second-largest entertainment network after Disney Star.

In a note put out, Emkay Global said NCLT approving the merger “is a major shot in the arm for Zee, also dismissing all related objections.” By way of a background, the approvals have already come from the stock exchanges and the Competition Commission of India. That said, the interim order from Sebi (Securities and Exchange Board of India), put out on June 12, saying ZEEL’s founder Subhash Chandra and his son, Punit Goenka, the company’s MD & CEO, had abused their board positions as directors/key managerial personnel of ZEEL for “siphoning off funds for their own benefit” and barred them from holding directorships in listed entities. This is significant as Goenka is slated to be the MD & CEO of the Zee-Sony merged entity. “With Punit Goenka’s case with Sebi still ongoing, the issue of who will be at the helm of the merged entity persists. But we believe that promoters’ proceedings are unlikely to derail the merger,” stated the Emkay’s report.

Zee and Sony inked a definitive agreement in the end of 2021, to combine the television network networks of both apart from digital assets, product operations and program libraries. In the post-merger entity, Sony’s shareholders will hold 50.86 per cent of the combined entity, while Zee’s promoters will hold 3.99 per cent, ZEEL’s shareholders will hold the remaining 45.15 per cent.

In terms of what remains on the approvals for the merger, a filing with the Registrar of Companies, according to it, will be done 30 days of receiving the NCL order and a vetting by the Ministry of Information and Broadcasting (MIB) are on the agenda, followed by the stock being delisted for around six weeks. Ashish Kumar Singh, Managing Partner at law firm Capstone Legal, agreed that the NCLT decision on the Zee-Sony merger means the process will likely go through. “On the specific issue of the SEBI interim order, that is independent since that specifically relates to the Zee promoters. It is quite possible that a new management could take charge at the merged entity if Zee's promoters do not get a clean chit. It needs to be understood that the NCLT decision is completely independent of the Sebi interim order,” he said.