Sony Group Corp’s India unit yesterday finalized merger plans with local broadcasting giant Zee Entertainment Enterprises Ltd in a deal that might yet be blocked by fierce opposition from a disgruntled US investor.
Analysts say the arrangement could create the nation’s second-biggest entertainment network, rivaling market leader Walt Disney Co.
The proposal gives Zee’s founding family 4 percent of the new entity, but keeps them in management control, with chief executive officer and managing director Punit Goenka to continue at the helm.
“The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms,” Goenka said in a statement.
However, Goenka’s tenure has been opposed by Zee’s largest shareholder, Invesco Ltd, which in September demanded his ouster for “repeated governance failures and underperformance.”
Zee and the US investment company have since faced off in court over Invesco’s pursuit of an extraordinary general meeting and board overhaul.
Sony’s deal would also allow Goenka’s family to raise its stake in the combined entity to 20 percent in the future — a clause shareholders led by Invesco are likely to oppose.
A successful merger would nonetheless be a “win-win proposition” that would expand the reach of both companies in India, Elara Capital PLC media analyst Karan Taurani said.
“Sony has a strong sports offering and an urban entertainment offering, which Zee does not have, and Zee is very strong in the regional and rural segments,” he added.
India, home to 1.3 billion people, has a US$24 billion entertainment market, accounting giant EY said.
If approved by regulators and shareholders, the deal is expected to be completed by the end of March next year and the new company is to be publicly listed in India.
Sony Pictures Networks India Pvt Ltd is to hold a majority 50.86 percent stake under the proposed merger.
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