Zee-Sony merger now likely by December

The proposed $10-billion Zee-Sony merger, which was approved by the National Company Law Tribunal (NCLT) last month, may see the light of day by December, even as legal challenges continue to mount against Zee Entertainment (ZEEL).

A note by Karan Taurani, senior vice-president, research at brokerage Elara Capital, says that the delay is marginal.

“The record date for a merger is usually given one week prior to delisting. However, there could be a marginal delay in filing closing precedents (CPs) of the merged entity. Subsequently, relisting may happen in the second week of December 2023 versus the second week of November,” Taurani said.

After the merger, announced in December 2021, the shareholders would get 85 shares of the merged entity for every 100 shares held in ZEEL. The stock of ZEEL will get delisted and relisted as the merged company after the exchange procedure.

ZEEL shares were down on Monday on the BSE, closing at Rs 268.15 apiece. The markets were closed on Tuesday due to Ganesh Chathurthi.

ZEEL had a particularly testing time at the courts last week, with the Securities Appellate Tribunal (SAT) adjourning the matter concerning the ban on Zee promoter Punit Goenka by the Securities and Exchange Board of India (Sebi). The matter was pushed to September 27, the third time in a month after first being adjourned on September 8 and September 14.

On the other hand, Axis Finance became the second lender after IDBI Bank to challenge the NCLT’s nod to the Zee-Sony merger in the National Company Law Appellate Tribunal (NCLAT).

“The adjudicating authority (NCLT) has failed to appreciate that the scheme is ex-facie illegal, unfair and unjust,” Axis Finance’s petition in the NCLAT said.

The petition has also claimed that an integral part of the scheme—Punit Goenka as head of the merged entity— must be resolved for the NCLT approval to be fair. Otherwise, it breaches Sebi’s order against Goenka, which bans him from holding directorships for a year, the petition said.

In a conversation with FE, senior advocate HP Ranina said that much would depend on what the NCLAT would say to the lenders’ appeal. It has asked Zee to file a response to both the cases before passing an order in the matter.

“No company in the midst of a merger will be comfortable with legal challenges. However, every individual or organisation has a right to exercise their legal options. The two lenders concerned are doing the same. Having said that, NCLAT’s next steps will be critical. Will the pleas be admitted or not? All of this will be closely scrutinised,” Ranina said.

The merger, according to analysts, will bring together over 70 TV channels, two video streaming services (Zee5 and SonyLiv) and two film studios (Zee Studios and Sony Pictures Films India).

Sony is also infusing $1.5 billion in cash and will have representation on the board of the merged entity as per the current merger scheme. It will indirectly hold nearly 51% in the merged entity, while Zee promoters will hold 3.99% and other shareholders will hold 45.15%. Financial Express