Truce at Zee as Invesco withdraws EGM demand
Premium- US investor to continue to monitor Zee’s ongoing merger with Sony
- Zee’s shares are held by different classes of public investors, with 96% of the shares in the hands of non-promoters
MUMBAI : Invesco Developing Markets Fund, the largest shareholder of Zee Entertainment Enterprises Ltd (ZEEL), signalled the end of a boardroom and legal feud with the broadcaster by withdrawing a call for a special shareholders’ meeting to remove ZEEL managing director Punit Goenka and recasting the board.
The US investor, which had accused the ZEEL management of corporate governance lapses, said it would continue to monitor ZEEL’s ongoing merger with Sony group and reserves the right to call an extraordinary general meeting (EGM) if the merger does not go as planned.
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“Since we announced our intention to requisition, Zee has entered into a merger agreement with Sony. We continue to believe this deal in its current form has great potential for Zee shareholders. We also recognize that, following the merger, the board of the newly combined company will be substantially reconstituted, which will achieve our objective of strengthening board oversight of the company," the fund said. “If the merger is not completed as currently proposed, Invesco retains the right to requisition a fresh extraordinary general meeting ," it added.
Invesco’s support for the merger cheered investors, sending the ZEEL stock soaring.
The stock shot up by 20% to ₹307.25 on BSE, minutes after the markets opened on Thursday, and ended trading with a 17% gain. The shares gained 10% on the previous day.
The investor’s surprise move came after a division bench of the Bombay high court on 22 March allowed it to call an extraordinary general meeting, setting aside an interim order by a single judge that restrained Invesco.
With close to an 18% stake, Invesco Developing Markets Fund initially opposed the Zee-Sony deal after its announcement on 22 September 2021.
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As of 31 December, Invesco managed $1.6 trillion in assets worldwide.
The Atlanta-based fund, on Thursday, said it backs the Zee-Sony merger as currently proposed and is reassured that Sony’s presence on the Zee Entertainment Enterprises board will address concerns around corporate governance.
Significantly, Invesco had also opposed the plan of Zee’s current promoters hiking stake in Zee Entertainment Enterprises through preferential warrants post-merger, proposed under the merger terms with Sony. It had also objected to paying a 2% non-compete fee to Zee promoters.
“Invesco has been looking to bring in a merger partner for Zee, but there were no competent offers to counter Sony’s bid," a person directly aware of the matter said, requesting anonymity.
It also unsuccessfully tried to broker a potential deal with Reliance Industries’ promoted Network18.
“Eventually, Invesco realized that Zee-Sony merger is possibly the best way to compete against Star-Disney on an equal footing and ensure that the investment made by Invesco in Zee stock keeps appreciating," said a second person, who also requested anonymity.
The Zee-Sony merger deal has been struck at ₹250 per share, while Invesco had entered Zee at an average price of around ₹223 per share in 2019.
Post the merger, Sony will be the sole promoter of the merged entity, with a 51% stake.
The merged entity’s board will be professionally run with majority control under Sony. The board will also decide the appointment of any director, including Zee’s current chief executive officer Goenka.
Zee’s shares are widely held by different classes of public investors, with 96% of the shares in the hands of non-promoters.
Foreign portfolio investors own 52.21%.
According to the proposed merger terms, Goenka will continue to lead the merged company as its CEO and will be the only existing member from Zee Entertainment Enterprises to have a board seat.
Five of the nine-member board will be top Sony executives. They will include Tony Vinciquerra, chairman and chief executive of Sony Pictures Entertainment (SPE), who might be chairman of the merged company in India.
Ravi Ahuja, chairman of global television studios and Sony Pictures Entertainment corporate development; and Erik Moreno, executive vice-president, corporate development and M&A, Sony Pictures Entertainment, are also slated to become directors, along with two Japanese executives. Out of three independent directors, Zee may get to nominate one on the board of the merged entity.
(Gopika Gopakumar also contributed to this story)
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