The Board of Directors of ZEE Entertainment Enterprises Limited (ZEEL) unanimously provided in-principle approval for the merger between Sony Pictures Networks India (SPNI) & ZEEL.
SPNI will also infuse growth capital into SPNI as part of the merger such that SPNI has approximately $1.575 billion at closing, for pursuing other growth opportunities.
Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25% in favour of ZEEL. However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07% of the merged entity being held by ZEEL shareholders and the remaining 52.93% of the merged entity being held by SPNI shareholders.
In a statement, Zee said its board has evaluated the merger not only on financial parameters, but also on the strategic value which Sony brings to the table. The board concluded that the merger will be in the best interest of all the shareholders & stakeholders. The merger is in line with ZEEL’s strategy of achieving higher growth and profitability as a leading media & entertainment company across South Asia. The board has authorised the management of ZEEL to initiate the required due diligence process.
The shareholders of Sony will hold a majority stake in the merged entity. The shareholders of ZEEL & SPNI have entered into a non-binding term sheet to combine both companies’ linear networks, digital assets, production operations and program libraries.
The term sheet provides an exclusive period of 90 days during which ZEEL and SPNI will conduct mutual diligence and finalize definitive agreement. The merged entity will be a publicly listed company in India.
As part of the transaction, Punit Goenka will continue to be the managing director and CEO of the merged entity. Further, certain non-compete arrangements will be agreed upon between the promoters of ZEEL and the promoters of SPNI. According to the term sheet, the promoter family is free to increase its shareholding from the current 4% to up to 20%, in a manner that is in accordance with applicable law. A majority of the board members of the merged entity will be nominated by the Sony Group.
It is anticipated that the final transaction would be subject to completion of customary due diligence and execution of definitive agreements and required corporate, regulatory and third-party approvals, including the votes of ZEEL’s shareholders.
ZEEL’s strong expertise in content creation and its deep consumer connect established over the last 3 decades, coupled with SPNI’s success across entertainment genres (including gaming and sports) will add significant value to the merged entity and its management team, thereby increasing shareholder value multifold.
R Gopalan, chairman, ZEE Entertainment Enterprises Ltd, said, “The Board of Directors at ZEEL have conducted a strategic review of the merger proposal between SPNI and ZEEL. As a Board that encompasses a blend of highly accomplished professionals having rich expertise across varied sectors, we always keep in mind the best interests of the shareholders.”
Source: Business-StandardFinancialsSony Pictures Network IndiaFY20 Profit: Rs 976 cr, Revenues: Rs 5,846 cr Cash on books: Rs 11,000 crZee EntertainmentFY 21: Consol profit: Rs 793 cr Revenues: Rs 7,730 crCash on books: Rs 1800 cr
Merged Entity*Sales potential: Rs 12,500-15,000 croresProfit potential: Rs 1800-2000 croresCash on Books: Rs 12,000 crCombined market cap as on date: Rs 50,000 cr (based on ratio announced)* Analyst projections
