In a recent development, the anticipated listing of the Zee-Sony merged entity has faced a delay of three to four months. Zee Entertainment has requested additional time before finalizing the merger with Sony Pictures Networks India Private Limited, now rebranded as Culver Max Entertainment Private Limited. The merger, initially scheduled for a stock exchange debut in January next year, is now expected to be listed by March or April.
The catalyst for this delay arises from Zee Entertainment’s request for an extension of the merger timeline from Sony Pictures Networks India Private Limited. The cut-off date for the merger, set on December 22, 2023, marks two years from the signing of the merger agreement on December 21, 2021. According to a recent filing with the Bombay Stock Exchange (BSE), Zee has sought additional time to ensure the effective implementation of the merger scheme.
Merger’s positive development
Industry experts suggest that the extension is a positive development indicating a high probability of the merger materializing. Karan Taurani, Senior Vice President at Elara Capital, asserts that while negotiations between the parties could conclude in the next 3-4 weeks, subsequent processes involving the Ministry of Information and Broadcasting, record date, and delisting/relisting may take an additional six-eight weeks.
Legal experts emphasize that the extension does not pose significant regulatory hurdles, as the Companies Act does not impose a time constraint on the merger process. Shiju PV, Senior Partner at IndiaLaw LLP, states that seeking an extension is well within legal bounds, especially if it aligns with the terms of the agreement.
A key factor contributing to the delay is the unresolved issue of appointing the CEO for the merged entity. The clash between Zee and Sony over Punit Goenka’s position as CEO has brought the merger to the edge of collapse. Zee insists on Goenka heading the combined entity, while Sony, wary of a Securities and Exchange Board of India (SEBI) investigation against him, is hesitant.
Taurani suggests that negotiations over the CEO position will likely transpire, and the merger might proceed without Goenka unless the SEBI investigation favors him. The outcome of the SEBI investigation, which could take 8-12 months, may influence Sony’s decision to propose a new CEO.
In June, Goenka expressed that the merger would proceed “with or without” him leading, following SEBI’s prohibition from Zee Group boards due to alleged fund mismanagement.
The merger, approved by the National Company Law Tribunal (NCLT) in August, faced complications when Goenka had to step down as CEO due to the SEBI order. Although the SAT set aside the order on October 30, it allowed the broader investigation to proceed, potentially intensifying SEBI’s efforts.
In a recent development, Zee Entertainment Enterprises Ltd has sought more time from Sony for their $10 billion merger. This comes amid rising unrest among investors, with the rejection of reappointing two independent directors and the withdrawal of a third candidate at Zee’s annual general meeting last week.
Zee’s notification to stock exchanges revealed that resolutions for reappointing independent directors Vivek Mehra and Sasha Mirchandani were defeated, and Adesh Kumar Gupta withdrew his candidature. The rejection of these resolutions, reflecting nervousness among minority investors, follows a trend of similar rejections in the past.
Foreign institutional investors, owning a significant third of Zee, voted against the resolutions, indicating scepticism about the merger’s success. The voting outcome aligns with the extended closure of the Zee-Sony merger beyond the initial deadline of December 21.
The rejection of Mehra’s reappointment, with 52% of shareholders voting against, highlights concerns about director responsibilities and potential conflicts of interest. Proxy advisory firms, including Institutional Investor Advisory Services (IiAS) and Stakeholders Empowerment Services, had recommended voting against Mehra’s reappointment.
Industry experts foresee a board refresh post-merger, with control shifting to Sony. Shriram Subramanian, Founder and Managing Director of InGovern Research Services, expects a new set of directors to be appointed. This boardroom shakeup echoes trends seen in other Chandra-owned companies like Dish TV India Ltd.
As Zee navigates this intricate landscape, the resolution of the CEO appointment and investor concerns will play pivotal roles in shaping the future of the merged entity. The extension in the merger timeline adds an extra layer of anticipation, underscoring the complexities of one of the most significant mergers in the Indian media and entertainment industry.
