The proposed merger of Zee Entertainment Enterprises(ZEE) and Sony Pictures Networks India (SPN) will need regulatory and compliance permissions, approval from 75% of shareholders, and could face integration issues, say legal and financial experts.
While it takes 30-60 days for the due diligence, stitching the deal will require consent from the lenders, approvals from shareholders and regulatory bodies like the Competition Commission of (CCI), as well as by the National Company Law Tribunal (NCLT), a time-consuming affair further hindered by the Covid-19 backlog.
“Typically, the transaction will take at least a year to be completed . Presently, it’s a non-binding document, so the first step will be the signing of a binding definitive agreement after due diligence. That should happen in a month or two,” said Sudip Mahapatra, partner at S&R Associate. “The next steps include approvals from the shareholders, regulatory bodies and lenders.”
Meanwhile. it is not clear whether Invesco, the largest shareholder of ZEE, will support the transaction. The financial investor, which owns a 17.88 % stake in the company, had ten days ago called for an EGM to oust Goenka and two other non-executive non-independent directors from the board of the company. It had not cited any reasons for doing also and it has also proposed the appointment of six independent directors.
Sony has signed a non-binding merger deal with Zee Entertainment. ET’s Gaurav Laghate takes you through the deal’s contours, which will create an entertainment behemoth with 75 channels and how company promoter Subhash Chandra proved once again that he is a master at the art of making a deal when the chips are down. Watch
Invesco’s support could be crucial as the deal requires the approval of 75% of ZEE shareholders.
An email query sent to Invesco, seeking its views on the deal did not elicit any response till press time.
An M&A expert who worked on the deal said the merger ticked all boxes and it would be strange for any financial investor to oppose the deal. “It’s a transaction which will create value for shareholders. We have already seen that the Street is happy with the valuation. Also, with Sony overseeing the board, there will be no room for any corporate governance lapses,” he said.
On the integration issue , there are a few genres—including Hindi general entertainment and movies, as well as Marathi—where both the companies have competing channels. A few will have to be shut down. Another challenge will be employee rationalisation, which could result in at least a few hundred positions becoming redundant.
Goenka, though, while addressing analysts on Wednesday, said that his priority would be to look at revenue synergies, rather than cost rationalisation. “In these kinds of mergers, the synergies are 6-10% on the revenue side, while the cost is secondary. I will be focusing on growth aspects rather than cutting costs,” he said.
Source: Economic Times