Fate of Sony-Zee Merger Likely To be Decided Today: Zee Entertainment Shares In Focus

The share price of Zee Entertainment Enterprises Ltd (ZEEL) remained under pressure on Friday (January 19) despite positive trading on Dalal Street as investors awaited cues on the fate of the Zee-Sony merger. Shares of Zee Entertainment Enterprises slumped 3.26% at Rs 240.05 per share at 11:27 am IST today.

Zee stock price grabbed attention today after a media report said that Sony Group Corp has called for a board meeting on Friday (today) to decide on the $10 billion merger with Zee Enterprises.

According to The Economic Times report, two key meetings are expected to take place where a final call will be taken.. According to the report, Sony is likely to call off the deal unless Puneet Goenka, ZEE MD and chief executive, agrees to the merger contours laid out.

The deal was announced two years ago, in a bid to create the country's largest broadcast company.

It is noteworthy to mention that Sony and Zee have failed to build consensus regarding Zee's Managing Director and Chief Executive Officer, Punit Goenka, leading the merged entities. Sony Group has been advocating for NP Singh, its India MD and CEO, to serve as the chief executive of the new entity in the interim unless Goenka is exonerated in all pending cases.

On Thursday, Goenka offered to resign from his position of CEO post-merger. The news triggered a rally in Zee Entertainment shares which rose over 7% at one point yesterday. Zee has, however, not yet agreed to the appointment of N P Singh as head of the merged corporation.

The merger deal was likely to be completed by December 20, 2023. However, later a one-month grace period was given to the two companies to resolve the differences or issues. Now, this period expires on Saturday, January 20, therefore Zee shareholders are keenly awaiting to get an update about the merger.

Earlier this month, reports of the merger falling through had also emerged, which Zee strongly denied.

An official statement from Zee read, "We wish to reiterate that the company is committed to the merger with Sony and is continuing to work towards a successful closure of the proposed merger." Sony did not make any official statement to the exchanges.

Currently, Zee has a market share of 18% in the Indian entertainment and broadcasting business against Sony's 6%. The proposed merger intends to create a 74-channel media behemoth, providing the Japanese group with a sizable market share in the media landscape in India. Sony's holding in the merged entity is expected to be around 53%, and the company has committed to investing $1.6 billion to consolidate its footprint.

ZEE may file a suit against Culver Max Entertainment claiming damages if the merger fails to go through by January 20, a report said.

Regulatory Challenges

The deal faced a huge setback in August last year when the Indian market regulator Securities and Exchange Board (SEBI) banned Goenka and Subhash Chandra due to allegations of fund diversion. Later, in October 2023 although the Securities Appellate Tribunal (SAT) overturned the order, regulatory challenges still persist. In the face of consistent delays and regulatory hurdles, Sony has though still not called off the deal but has advocated for its India MD and CEO, NP Singh, as the interim chief executive.

Zee share price performance:

In the last six months, Zee shares have gained 7.44%. The last one year returns from Zee shares are up 6.84%. In the last two years, the share price of Zee has fallen 24.54%. This year, so far the stock has plummeted 15.91%.