The merger between Zee Entertainment Enterprises and Sony Pictures Networks India Pvt Ltd is set to be announced in a day or two with the board of the Punit Goenka-led company green-lighting the deal. The 90-day exclusivity period ended on Tuesday but there was no official statement from the companies on whether they will extend it further.

According to the terms of the agreement, Sony is set to hold 50.8 per cent in the merged entity, while domestic shareholders will hold over 47 per cent. Zee promoter family is set to initially hold a 2.2 per cent stake that will go up to 3.99 per cent. There will also be provision for the promoter family to increase stake in the merged entity up to 20 per cent subject to conditions including buying shares at market value.

The combined entity is set to have a market share of 27 per cent (Sony has 9 per cent and Zee 18 per cent), the largest, followed by Star with 24 per cent. In the over-the-top (OTT) segment, the merged entity will have a viewership share of 13-15 per cent.

Invesco challenge

The deal also serves to ward off a challenge from US-based investment manager Invesco, also Zee’s largest shareholder, which has been seeking the removal of ZEE promoter and MD, Punit Goenka, since September.

The merger is an attempt by the promoter family to retain control against the rising discontent amongst shareholders, proxy advisory firms and Invesco’s allegations of corporate misgovernance by the promoter and certain directors.

Invesco pursued the removal of Goenka from the company’s board even after the announcement of the merger. The matter is now before the Bombay High Court on an appeal after the court earlier decided not to allow Invesco to hold an EGM to remove Goenka.

“ZEE’s merger with Sony… addresses most of the concerns of its stakeholders. The main promoter will be Sony, and the board will be stronger in terms of corporate governance and performance,” Edelweiss said in a report. This is because Sony will have the right to appoint majority of directors.

Edelweiss said the merger could unleash huge synergies in content and OTT.

Elara Capital estimates that the merged entity will hold a valuation of ₹81,400 crore of the TV business and ₹9,100 crore for the consolidated digital business.

‘Too big to be replaced’

“Sony-ZEE together command 22 per cent of the ad revenue market. ZEE-Sony may become irreplaceable given their sheer size (45 per cent ad market share) and gain market share in the medium to long term,” said Karan Tuarani of Elara Capital.

The scene now shifts to Zee shareholders who will have to vote on the merger.

J N Gupta, Managing Director, Stakeholders Empowerment Services, said for its smooth sailing with shareholders, the merger will have to be backed by Invesco.