Sony merger: ZEE shares rally 7% on report Punit Goenka ready to give up CEO role

Shares of ZEE Entertainment Enterprises Ltd (ZEE) climbed over 7 per cent in Thursday's trade amid a media report that suggested that both Culver Max Entertainment Private Limited  (erstwhile Sony Pictures Networks India Private Limited) and ZEE held discussions for the merger completion and that the ZEE CEO Punit Goenka offered to give up the chief executive role for the merged entity.

Following the development, ZEE shares climbed 7.38 per cent to hit a high of Rs 263.90 on BSE. The stock has been down 8 per cent in the last one month. As per an ET NOW report, while ZEE wanted Goenka to take up the CEO role, Sony wanted NP Singh, CEO of Sony India, as CEO of the merged entity. ZEE is not in agreement on Singh to be the top boss of the merged entity, the report suggested.

Earlier there were reported that ZEE might file a suit against Culver Max Entertainment claiming damages if the merger between the two media firms fails to go through by January 20. Sources told ET NOW that Sony was not inclined to extend the merger deadline beyond January 20 and that it believed that if merger fails, it has no liability to pay any penalty.

The mega merger deal was signed between ZEE and then Sony Pictures Networks India in 2021. It was expected to be completed within two years before December 21, 2023. But ZEE later asked Bangla Entertainment Private Limited (BEPL) and Culver Max Entertainment to extend the date required to make the merger scheme effective.

Later a news emerged that Sony was looking to call off the proposed merger due to delays. But ZEE informed stock exchanges that CMEPL and BEPL had decided to enter into good faith negotiations as required under the MCA entered amongst the parties.

ZEE Q3 results preview

ICICI Securities expects ZEE to report a 15.9 per cent sequential decline consolidated revenue at Rs 2,050 crore  given, a high base as Q2 revenues were boosted by a strong performance of ‘Gadar 2’.

"We estimate subscription revenue to remain flattish at Rs 890 crore (up 1 per cent QoQ/0.3 per ecnt YoY) and advertisement revenue to grow sequentially by 3 per cent but decline 5.2 per cent YoY to Rs 1,008 crore. We believe given the sports dominated quarter, allocation to sports channel would have increased compared to GEC. We estimate Ebitda to decrease
by 36.1 per cent QoQ (down 37.1 per cent YoY) to Rs 210 crore in Q3FY24," ICICI Securities said.

The brokerage expects ZEE to register net profit of Rs 15.9 crore, down 35 per cent YoY. "We note that ad revenue
performance is showing signs of recovery. However, stock price movement would be dependent on the news flow regarding Zee-Sony merger. We maintain ADD on the stock and maintain our target price of Rs 280 (~19x one year forward P/E
multiple), the brokerage said.

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