Mumbai: Zee Entertainment Enterprises Ltd, which is in financial trouble, is set to merge with Sony Pictures Networks India (SPNI). The ZEEL board of directors has approved the merger in principle. Puneet Goenka will remain the Managing Director and CEO of the merged entity.
ZEEL's regulatory filing has stated, "The Board has evaluated not only on financial parameters but also on the strategic value which the partner brings to the table. The Board concluded that the merger will be in the best interest of all the shareholders & stakeholders".
"The merger is aligned with ZEEL's strategy of achieving higher growth and profitability as a leading Media & Entertainment Company in South Asia," the company said.
According to the filing, SPNI shareholders will own the majority of the merged entity.
"The shareholders of SPNI will also infuse growth capital into SPNI as part of the merger such that SPNI has approximately $1.575 billion at closing, for use in pursuing other growth opportunities."
"Based on the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25 per cent in favour of ZEEL. However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07 per cent of the merged entity to be held by ZEEL shareholders and the balance 52.93 per cent of the merged entity to be held by SPNI shareholders," it added.
"The recent announcement of a deal with Sony will be a very positive trigger for Zee Ltd as it will have a quality promotor and that will ease the issue of corporate governance in the company," said Santosh Meena, Head of Research, Swastika Investment.