Facing serious financial issues, Zee Entertainment Enterprises has decided to merge with Sony Pictures Networks India (SPNI) and its board has given in-principle approval for the move that will change the media scene of India. 

The buzz about the deal has surged the share price of Zee Entertainment from Rs. 281.20 to Rs.355 on Wednesday, creating ripples and huge demand.  

Announcing the decision, ZEEL said in a regulatory filing that "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."

Punit Goenka
Punit GoenkaIANS

"The merger is in line with ZEEL's strategy of achieving higher growth and profitability as a leading Media & Entertainment Company across South Asia. According to the filing, shareholders of SPNI, will hold a majority stake in the merged entity.

"The shareholders of SPNI will also infuse growth capital into SPNI as part of the merger such that SPNI has approximately USD1.575 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."

Furthermore, ZEEL and SPNI have entered into a non-binding term sheet to combine both companies' linear networks, digital assets, production operations and program libraries.

The term sheet provides an exclusive period of 90 days during which ZEEL and SPNI will conduct mutual diligence and finalize a definitive agreement. The filing said that the merged entity will be a publicly listed company in India.

The move to merge ZEE comes close after a boardroom brawl with the company's two largest shareholders expressing no-confidence with existing management and seeking an extraordinary general meeting to sack a few directors, including ZEEL's managing director and CEO Punit Goenka.

After the merger,  Goenka is expected to be MD and CEO of the new entity.

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