On 22 September 2021, Zee Entertainment enterprises and Sony private networks hammered out a surprise merger deal to create India’s second-largest entertainment network by revenue.
When a company takes over or purchases another company's shares to gain control of that company and establishes itself as the new owner, the purchase is called an acquisition. Whereas merger is an agreement whereby two existing companies of the same size unite into a single new entity, rather than remaining separately owned and operated.
ZEEL+SONY is a merger whereby the two companies have entered into a non-binding term sheet. The objective of merger is to combine linear networks, digital assets, production operations and program libraries of both companies. The wednesday morning announcement saw shares of the Subhash Chandra-founded company spike as much as 40% before ending at INR337.10, up to 32%, on the BSE, for a market value of about INR32,340 crore.
The new entity will have all what these 2 entertainment giants got-
● The 75 Television channels
● The video streaming Platforms including ZEE5 of ZEE and Sony LIV of Sony
● The film studios -Zee Studios of ZEE and Sony Pictures Films India of Sony
● digital content studio -Studio NXT
It will benefit consumers throughout India across content genres; from film to sports under one roof.
What will shareholders of ZEEL and SONY get from the deal?
The new entity will be a public company listed in India. Sony Pictures Entertainment—the parent company of SPNI-will infuse $1.575 billion in the entity, because of which Sony’s shareholders will get 53℅ stakes in the merged company, While ZEEL shareholders will hold 47% of the entity. At present, 3.99% of ZEEL shares is held by its promoters, while 96.01% of ZEEL shareholding is public.
What’s ZEEL’s interest in the deal?
● Re-entry in Sports segment: ZEE's network viewership share is more than that of Sony. Also, it specialises in regional general entertainment channels (GEC) and movies. However, ZEE is a weak player in case of Hindi GEC and sports segments- the segment strongly dominated by Sony in India. Moreover, Ten Sports brand-The flagship sports portfolio of Zee Entertainment had already been sold to Sony Pictures Network India in 2018. The sale had an additional agreement that prevented Zee from entering the sports segment since then. Merger of SONY and ZEE brings opportunity for ZEE to enter into Sports segments again.
● Rid of corporate governance issues: Zee Entertainment’s largest shareholders- Invesco Developing Markets Fund and OFI Global China Fund LLC had voted to remove Punit Goenka and two other independent directors. Goenka had been part of the company since 2010 and led the company’s rise in viewership share from 10% in 2016 to 20% in 2020. Moreover, he is to continue in his position as the managing director and chief executive officer of the merged entity. For ZEE, it is the most appropriate time to complete merger as it will help company get rid of corporate governance issues raised by its investors.
How Sony benefits from the deal?
● Local Partner: Ever since the Disney+HotStar collaboration has achieved a note-worthy position in the content market, Sony has been on a search for a local partner in India to confront the same. Sony had earlier approached Reliance owned-Viacom for a possible merger but it failed due to valuation and other merger clauses. Through merger with ZEE, Sony has an opportunity to observe some of its own downsides and pitfalls, especially in its bunch of GECs, which have a huge amount dependent on seasonal productions such as KBC for its success.
● Major Broadcasting House: Zee leads broadcasting, movies, music, digital, live entertainment and theatre businesses, both within India and overseas, with over 260,000 hours of television content. Zee also owns the world’s largest Hindi film library, with rights to more than 4,800 movie titles across various languages which gives an opportunity to Sony to dominate Indian entertainment industry.
BY:- Nandini
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