The National Company Law Tribunal (NCLT) on Thursday approved the proposed merger of Zee Entertainment Enterprises Ltd with Sony India. The NCLT had initially reserved its verdict on the merger between Zee Entertainment Enterprises and Culver Max Entertainment (previously known as Sony Pictures Networks India) on July 10. This is a key regulatory approval for the mega merger, aimed at creating a $10-billion media giant, which was announced in 2021 but has been delayed for multiple reasons.
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On Thursday, ZEEL’s scrip on BSE closed 18% higher at Rs 285.55.
The merger was initially held up by a courtroom feud between Zee’s founders and its largest shareholder, then subsequently by an insolvency case filed against Zee that was halted in February.
In December 2021, Zee Entertainment and Sony Pictures reached an agreement to combine their businesses. Subsequently, both media companies approached the tribunal to seek approval for the merger, having already obtained necessary permissions from the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and other regulatory bodies like the Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI).
“Zee, having faced legal hurdles in finalising the merger, can now breathe a sigh of relief as the deal progresses. The merger with Sony is expected to benefit various stakeholders, including the companies themselves by enhancing their competitive positions, shareholders through potential increased value, and viewers by potentially offering a broader range of content. The combined strengths may lead to synergies that can foster growth and efficiency in their operations,” said Sonam Chandwani, Managing Partner KS Legal & Associates.
Last month, the Mumbai bench of NCLT, comprising H V Subba Rao and Madhu Sinha, reserved the order after hearing arguments from creditors who objected to the scheme including Axis Finance, JC Flower Asset Reconstruction Co, IDBI Bank, Imax Corp and IDBI Trusteeship.
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Last month, the counsel representing ZEEL, Janak Dwarkadas, said the scheme of arrangement between ZEEL, Sony has been approved by 99.97 per cent of shareholders of the company and regulatory bodies like the BSE, NSE, and CCI.
The total value of claims that is raised by creditors, who are objecting to the scheme of arrangement, is Rs 1,259 crore, he said, adding that they are holding the merger to ransom.
The total public shareholding of ZEE is 96.01 per cent, of which 70 per cent is held by public institutions. About 25.88 per cent is held by public non-institutions, while the promoters hold only 3.99 per cent, he said.
SAT had upheld Sebi’s interim order which restrained both Zee Entertainment promoters Subhash Chandra and Punit Goenka from holding board positions in public listed companies for a year, on account of alleged fund diversion.
According to the creditors objecting to the merger, the order has a direct bearing as one of the integral parts of the scheme of merger is the appointment of Goenka as the Managing Director of the merged entity.
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As there is a regulatory bar on Goenka holding such positions, the merger shouldn’t go through, they submitted last month.
