Jan 28 2024, 08:43
Sony-Zee merger: the deal slowly morphing into a hostile takeover by the Japanese?
Several conditions precedent and terms involving closure of overseas businesses, domestic divestments and additional provisions have been complied with by Zee, yet Sony is gunning to grab its only board seat and key managerial position, say insiders.
While recent reports of the Japanese major's unannounced plans to terminate the deal and vehement denials from Zee on the bourses make it clear that all is not well, some people involved in the negotiations and some public shareholders feel that Zee and its shareholders are getting a raw deal.
With the so-called 'good faith' negotiations sliding into bitter shadow games fought in the media ahead of the January 20 deadline, Zee stocks have seen a significant value erosion on the bourses. From a high of INR290, it closed by January 4, the shares lost around 13% on January 11 to INR250 on the BSE. However, despite a weak market on Thursday when the Sensex lost over 300 points, Zee shares gained 1.73% fuelling hopes of a compromise. Several public institutions like LIC and mutual funds own significant stakes in Zee, making the deal a matter of immense interest for the market participants.
Cap on promoters' stake: A pertinent point mentioned in the agreement by Sony, which has not been brought to the fore, was limiting the equity that promoters may own in the combined company to 20% of its outstanding shares. This construct does not provide the promoters (founders) of ZEEL any pre-emptive or other rights to acquire equity of the combined company from the Sony Group, the combined company, or any other party.
Shutdown of profitable overseas businesses: As part of the 'closing conditions' set forth in the scheme, Zee was asked to shut certain operations in its key international markets including Russia, Thailand, and Germany. Despite these businesses being profitable for the company, these operations were closed down to honour the terms of the scheme. Should Sony decide to terminate the merger, what compensation would Zee get for the profits it has foregone from these businesses?
Divesting Margo: Despite this being a merger of two companies, it was only Zee that largely shut certain operations or was asked to divest certain businesses of the company including Margo Networks. Zee had invested over INR500 crore in Margo ahead of the merger talks. Following Sony's disinclination to take on this business, which had got into litigation, the business is in the process of divestment.
Provisions for cricket broadcast deal: To tap the sports monetisation space, Zee inked an association with Disney Star to broadcast the ICC men's and women's matches for a period of four years starting 2024. This was a significant investment meant to strengthen the sports portfolio of the merged
source:et
Jan 28 2024, 08:43
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