The board of Zee Enterprises has given its in-principle approval to merge with Sony Pictures Networks India Limited (SPNI), the company announced in a stock exchange filing on Wednesday.
Combined, the entity will be India's largest entertainment network with 75 channels and a 26% viewership share.
Sony has 26 channels, while Zee has 49 channels. The exchange filing stated that Zee Entertainment has a presence in 173 countries reaching 1.3 billion people while Sony has 700 million viewers in India.
Data from the Broadcast Research and Audience Council in India (BARC) show several channels from rival Disney-backed Star TV, like Star Maa and Star Plus, dominating the weekly television viewership (as showed by average minute audience or AMA).
In the merged entity, the shareholders of SPNI will hold the majority stake. The company will further undertake a capital infusion that will see the merged entity have $1.575 billion at closing of the deal to undertake investments.
According to the existing equity value, the merger ratio would be 61.25% held by Zee, but the capital infusion will see the resultant ratio at 47.07% held by Zee and the remaining 52.93% to be held by Sony Networks.
Under the agreement, the current promoters of Zee would also be allowed to raise their stake to 20% from 4%, and there would be certain non-compete agreements between the promoters of Sony and Zee.
Punit Goenka will continue to be the Managing Director and Chief Executive Officer of the combined entity. This development follows the feud between Zee and Invesco Oppenheimer, an asset management company who is the company's largest shareholder. Invesco and its Chinese subsidiary OFI Global hold a 17.88% stake in Zee and earlier this month called for an extra-ordinary general meeting of shareholders of the company to oust Goenka and two independent directors from the board over corporate governance concerns.
Furthermore, Invesco proposed six of its own nominees to the board. However, under the merged entity, a majority of the board of directors will now be nominated by the Sony Group. A proxy advisory firm, InGovern Research, has said that Invesco has called off the EGM, which can be read here.
The companies - Zee and Sony - have agreed to a non-binding term sheet to streamline assets, networks, production and libraries. They will also have an exclusive period of 90 days to conduct mutual diligence and reach agreements.
The merged entity will be a publicly traded company in India.
The stock market declaration can be read here.
ZEEL (Zee Entertainment Enterprises Limited) closed at ₹333.70, up 30.50% or ₹78 on the National Stock Exchange.
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