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Sony India Acquires Zee, the Country’s Largest Publicly Listed TV Network | Media News

The deal would expand Sony’s media operations in the world’s second most populous country and help struggling Zee.

The Indian unit of Sony Group Corp. signed a non-binding deal to buy the nation’s largest publicly traded television network, Zee Entertainment Enterprises Ltd., plunging into a beleaguered company whose shareholders have called for the removal of key officials.

Shares of Zee jumped 20% after the deal was announced, giving it a market value of $4 billion. About 53% of the merged entity would be owned by Sony India shareholders and the rest by Zee shareholders, the companies said. Sony shareholders will inject capital into its unit so that it has approximately $1.58 billion in funds at closing, and the majority of the board would be appointed by Sony.

The deal would expand Sony’s media operations in the world’s second most populous country, while propelling Zee CEO Punit Goenka to the top of a larger entity. Goenka, whose removal Zee shareholders have demanded, would lead the combined company, under the terms of the deal.

Still, the proposed combination must be approved by 75% of Zee shareholders, according to Shriram Subramanian, founder of proxy advisory firm InGovern Research Services Pvt. ltd. A vote is expected to take place after the terms of the deal are finalized – Zee and Sony said they are entering a 90-day period of exclusive talks during which they will conduct mutual due diligence and negotiate a binding agreement.

The announcement adds another twist to Zee’s fate after Invesco Developing Markets Fund and OFI Global China Fund LLC, which together own around 17.9% of the network’s capital, called for an extraordinary general meeting of shareholders last week to oust Goenka along with two board members. . The withdrawal was seen as a move aimed at ending founder Subhash Chandra’s family’s hold on the company, which was founded in 1992 and was once Rupert Murdoch’s Indian partner. Both directors have resigned with immediate effect.

“There’s nothing wrong with the two companies proposing a merger because even CEOs can engage in merger discussions and then approach shareholders for a vote,” Subramanian said. “Invesco did not have an alternative plan and therefore I would find it surprising if they did not support this merger. As a fund they would be interested in financial returns and clean governance.”

Representatives for Invesco in India did not immediately respond to an email seeking comment. Directors present and voting at a Zee board meeting on Tuesday gave unanimous approval in principle for the merger, Zee said.

Chandra, a rice trader turned media mogul, and his family had reduced their stake in Zee to help reduce the debt of their larger Essel group. The call to remove Goenka as director came after Chandra, in a letter dated August 3, said the group had come out of financial stress and settled 91% of total debt owed to 43 lenders.

“With Sony as majority shareholder and a likely reconstituted board, the merged entity would be the best solution Invesco could have hoped for,” Subramanian said.