Zee-Sony Merger: After 14% Drop, ZEE Shares Gain 4.5% As $10 Billion Deal Takes Limelight; Should You Buy?

When exactly will Sony and Zee Entertainment complete their $10 billion merger deal? It's a question that has taken the limelight in the media sector this week. The latest buzz in the long-pending deal is that Sony is most likely to continue merger talks till January 20th, which is not too far away. After nosediving by at least 14% in the previous day, the Indian media stock traded on a positive note however pulled back slightly from its huge early gains.

At the time of writing, ZEEL's share price traded at Rs 262.95 apiece, up by 2.61% on BSE with a market cap of Rs 25,256.86 crore.

In the early deals, the stock gained over 4.5% to hit an intraday high of Rs 267.85 apiece.

ZEEL shares have resisted hitting the Rs 300 mark, and investors are suggested to be cautious.

What should investors do with ZEEL's share price?

In his technical analysis for ZEEL shares, Jigar Patel, Senior Manager - Equity Research at Anand Rathi said, "Recently, on a weekly scale, ZEEL has failed to cross its resistance of 300. Since then, it has made a decent correction of 50 points and is currently placed near the 250 mark."

He added, "As we advance, 237 would be credible support. On the flip side, if it closes below 237, then we might see 225 levels. On the indicator front, stochastics weekly has formed a bear divergence, so one needs to be cautious."

In the latest buzz, as per Nikkei Asia, Sony Group is continuing talks on a deal to merge its Indian subsidiary with Zee Entertainment Enterprises, people involved in the negotiations have said. Also, the report said, that the talks will continue until January 20.

This report comes with ZEEL's clarification over another report which claimed that SONY had scrapped talks of a proposed $10 billion deal. ZEEL called this report "baseless and factually incorrect." It also added, "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."

Earlier this week, the Economic Times reported that Sony Group Corp is close to calling off its proposed $10 billion merger between its India operations with Zee Entertainment. The suitors involved in the merger could not agree with ZEEL MD Punit Goenka being the chief executive officer (CEO) of the merged entity. Goenka is currently under investigation for siphoning off money from Zee Entertainment and other companies under the Essel Group.

If Sony would or may cancel the deal, Parth Shah, Research Analyst, StoxBox said that "no longer there will synergy benefits from the proposed merger, we believe that the topline of Zeel will be impacted in the medium term." With the latest report, it will be keenly watched what will be Sony-Zee merger development after January 20.

Furthermore, Shah said, "Though the company is moderately growing its advertising revenue, we do not see more upside for the company from its current market price."

The deal was first signed in December 2021. Sony and ZEE came into agreements to merge ZEEL with and into SPNI and combine their linear networks, digital assets, production operations and program libraries. Post the deal, SPE will indirectly hold a majority of 50.86% of the combined company, the promoters (founders) of ZEEL will hold 3.99%, and the other ZEEL shareholders will hold a 45.15% stake.

Disclaimer:

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