Stocks

SEBI examining Invesco’s role in proposing RIL-Zee deal

Palak Shah/Ayushi Kar Mumbai | Updated on October 18, 2021

Zee writes to SEBI highlighting regulatory issues that need to be investigated

Market regulator SEBI has asked US-based Invesco Developing Markets Fund, one of the largest shareholders of Zee Entertainment Enterprises (Zee), to explain its role in trying to take the proposal of Reliance Industries (RIL) group to Zee’s promoter family.

This comes even as Zee has written to SEBI, wherein the board of the company has sought an investigation against Invesco for ‘motivated’ disclosure about RIL’s interest in Zee.

On SEBI’s part, the regulator is concerned if there was unpublished price sensitive information (UPSI) that was misused and violation of public disclosure norms, sources told BusinessLine. SEBI is also trying to understand if the governance issues being raised by Invesco were fresh or ongoing for the past few years and why it did not inform the regulator earlier.

Invesco’s stake in Zee

Invesco, along with OFI Global China Fund LLC, holds nearly 18 per cent stake in Zee while the founding promoters of the company own only 3.99 per cent stake. Invesco, aided by its shareholding might, was attempting to remove the company’s MD and CEO Punit Goenka and appoint its nominee on the board, citing corporate governance issues earlier. But just a few days after Zee announced a merger deal with Sony Pictures on September 22, Invesco revealed that it had facilitated talks between RIL and Goenka for a potential takeover of Zee by the Mukesh Ambani-led group.

It has now come out that talks between RIL and Zee could have first started in February this year but all the parties remained silent about it for nearly seven months. The fact that RIL was in talks to acquire Zee was a UPSI, experts say.

In an intimation to the stock exchanges last week, Zee has levelled charges of a hostile takeover attempt by Invesco and RIL. Zee has further revealed that Goenka was even cautioned by Invesco if he did not approve the deal.

“When Punit Goenka expressed governance concerns in relation to the deal, especially surrounding the valuation gaps in the merging entities of the strategic group (RIL), he was informed by Invesco that the deal would be consummated with or without him. Invesco time and again reminded Goenka that if he were to refuse to progress with the deal, he and his family would lose out,” Zee’s intimation to the stock exchanges said.

Zee has also told the stock exchanges that Invesco had already set the parameters of the deal with RIL and unilaterally agreed to the valuations without any further room for negotiations. Further, Zee said that valuations of RIL entities could have been inflated by ₹10,000 crore and that would have caused a loss to Zee shareholders had the deal been approved.

“There are several open-ended questions that Invesco and Zee need to answer. The chief question is why was everybody silent about the deal talks that were going on between Zee and RIL for several months,” said JN Gupta, founder Stakeholder Empowerment Services.

Invesco moves NCLT

Invesco did not respond to BusinessLine’s email about the SEBI query. But the fund has maintained that it will support any deal in the larger interest of Zee’s public shareholders. The merger between Zee and Sony too is not final and both the parties have entered into a “non-binding” agreement.

Invesco has filed a suit in the National Company Law Tribunal (NCLT) seeking an emergency meeting of shareholders to oust Goenka. NCLT is yet to adjudicate the matter. Zee has filed a counter-suit against Invesco in the Bombay High Court, seeking to declare the requisition notice sent by the fund calling for the removal of Goenka as illegal and invalid.

Published on October 17, 2021

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