Zee hits back at Invesco's open letter, rebuts objections on Sony merger deal

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Zee Entertainment Enterprises Ltd on October 13 responded to an open letter released by shareholder Invesco Developing Market Funds, with a strong rebuttal to the objections raised in relation to the merger deal with Sony Pictures Networks India (SNPI).

Invesco, which holds nearly 18 percent stake in Zee, had on October 11 raised apprehensions related to non-compete fee and the possibility of increasing the promoter group's stake to 20 percent in the proposed Zee-Sony merged entity.

Regarding the non-compete fee, Zee noted that the transfer of 2.11 percent shares in merged entity to Zee Group will be a "secondary transfer from the promoters of Sony", and will "not be dilutive to any of the shareholders of the company".

On the possibility of increasing the promoter group's stake from four to 20 percent, Zee pointed out that "there is no right provided to the promoters to increase their stake".

"Any increase in stake of the promoters, if any, would take place in the manner and at prices that are permissible under applicable laws, if the promoters chose to increase their stake," it clarified.

Zee, while referring to the potential merger deal with a strategic group that was proposed by Invesco in February 2021, said it offered a 3.99 percent shareholding to the promoter group along with 4 percent of the shareholding to MD and CEO Punit Goenka in form of employee stock options (ESOPs).

"Accordingly, the existing promoter group of the Company along with Mr. Goenka would have held up to 7-8% in the Merged Entity. As such, we believe that Invesco's stance in their Open Letter that they 'will firmly oppose any strategic deal structure that unfairly rewards select shareholders, such as the promoter family, at the expense of ordinary
shareholders', runs contrary to the very deal Invesco was itself proposing only a few months ago," it said.

Earlier in the day, Reliance Industries Ltd, which was revealed by Invesco as the strategic group which had entered into negotiations with Zee in February-March, said it regrets being drawn into the dispute. The company said it had proposed a deal but decided not to proceed further due to differences between Goenka and Invesco.

Zee, in its statement in response to Invesco's open letter, said the shareholder group is not motivated by concerns related to any corporate governance issue, but "by the events that transpired during February-April 2021".

On the Sony merger deal, the company said it appreciates Invesco's demand on the need to evaluate the deal, but added that the shareholder should "stop publishing half truths" about the proposed merger.