Zee-Sony merger to be completed in 8-10 months

The definitive agreement or the merger of Zee Entertainment Enterprises Ltd. (ZEEL) and Sony Pictures Networks India (SPNI) has been signed and the merger process will take at least 8 months to close.

The merger plan of ZEEL with SPNI was announced on September 22, 2021, and as a part of the deal, Sony will own 50.86 per cent of the merged entity, while the promoter group Essel will own a 3.99 per cent stake. The public shareholding will stand at 45.15 per cent.

The definitive agreement was signed between the companies on December 21, 2021, a day after the 90-day exclusivity period of the non-binding bid ended on Tuesday.

After signing the agreement, during a conference call Punit Goenka, who will lead the combined company as its Managing Director & CEO, said that the entire merger process along with approvals will take eight to 10 months to be completed. He added, there are multiple stages in bringing the combined company into existence. As for the process, we will move to the next step that involves all the necessary regulatory and shareholder approvals. After the merger, the brand Zee will become part of the new entity and the newly merged company will decide which brands to keep and for how long. There will be a 6-8 per cent revenue synergy in the first joint financial year itself.

In relation to the Over The Top (OTT) platforms that the two companies own at present, namely ZEE5 and SonyLIV, Goenka said that the two OTT platforms will continue to run their businesses independently. We cannot come together until the merger process is completed.

Adding to this, Goenka said the merged entity will accelerate its digital platform and will significantly invest in premium content including sports. The company will be aggressive in sports acquisitions independently and as the combined entity wise also. However, Sony's music and movies business will remain out of the merged entity.

The company will use the cash in multiple aspects like M&A or bidding for sports content among others. Promoters of Sony will invest an additional $300 million in the new company before the deal closes. Sony will invest $1.5 billion (assuming an INR: USD exchange rate of 75:1) in the merged company.

The cash will be utilised for multiple aspects like M&A and bidding for sports content among others. The company will use the cash as growth capital for the next 3 to 5 years.

After the merger, shares of Zee Entertainment's will be suspended for about three weeks after which the stock will be relisted. The merged company will consider OTT-business further. The company will continue to be dividend-paying.

The agreement follows the conclusion of an exclusive negotiation period during which ZEEL and SPNI conducted mutual due diligence. After closing, the new combined company will be publicly listed in India. The closing of the transaction is subject to certain customary closing conditions, including regulatory, shareholder, and third-party approvals.

Shares of Zee Entertainment Enterprises Limited today closed at Rs 338.10, down 3.04 per cent, at BSE as compared to the previous close of Rs. 348.70.