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After nearly six months of negotiations with several strategic investors, which included Comcast and Sony Pictures, the Subhash Chandra-backed Essel Group has decided to sell 11 per cent promoter stake in Zee Entertainment (ZEEL) to Invesco Oppenheimer Developing Markets Fund.
Invesco Oppenheimer, one of the oldest investors in the company, already holds 8 per cent in ZEEL and has been an investor for about 17 years. The fund has now agreed to buy up to an 11 per cent stake in ZEEL from its promoters, for a total consideration of up to ₹4,224 crore, taking its stake in the company to 19 per cent. Punit Goenka, CEO at Zee Enterprises, told BusinessLine that he expects the deal to close before the end of August.
At market price, the deal offers more than a 10 per cent premium to Zee promoters. Post the deal, the promoters will hold just over 25 per cent in Zee Entertainment.
“My first preference was a strategic partner. But I had to keep financial investors ready as backup. It’s unfortunate the strategic partner didn’t understand the gravity of the situation. So we took a hard decision this weekend that we’ll go with a financial investor,” Goenka said. The Zee Group has about ₹11,000 crore of promoter debt that the company is trying to repay by the end of September. While the deal with Oppenheimer fund doesn’t cover even half of the fund requirements, it does give the company a floor price that will help them with further negotiations.
The balance funds needed to settle the debt will be raised by selling non-media assets of the Zee group such as road and solar projects.
“We have non-binding term sheets already with us (to sell non-media assets). This term sheet (with Oppenheimer) will give our corporate team some strength to negotiate harder. Because suddenly, ₹4,200 crore of liquidity will come into the group. That will ease the pressure. We will completely exit the non-media assets,” Goenka said. Goenka said if the company is unable to raise enough money from selling non-media assets, it may sell additional 4-5 per cent of Zee Entertainment stake to other financial investors. “Oppenheimer and us will jointly look at whom we can bring in as the next financial investor,” said Goenka.
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