Brokerages mixed after Zee settles merger disputes with Sony, flag other issues

So far this year, Zee Entertainment stock has plunged 47 percent, underperforming benchmark Nifty which has gained around 14 percent during this period.

Shares of Zee Entertainment gained on August 28 as 1.29 million shares of Zee Entertainment were traded in a single block in opening deals, Bloomberg data showed. Additionally, several brokerages shared their outlook on the stock following the media company's agreement with Sony India to settle all merger-related disputes.

The agreement releases both Zee and Sony from all document claims. It also includes the withdrawal of all claims for the $90 million termination fee, along with litigation and other related costs.

According to analysts at Emkay, this settlement brings an end to a tumultuous journey of nearly three years. However, they caution that other legal risks remain, including Disney's proceedings for non-compliance related to cricket rights purchases and Punit Goenka's ongoing SEBI case.

Citi has issued a sell call on Zee Entertainment with a target price of Rs 137 per share. The focus is now on the company's business fundamentals following the recent dispute settlement with Sony India, the foreign broking form said, adding that the settlement is expected to alleviate some investor concerns.

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Meanwhile, UBS has maintained a neutral stance on Zee Entertainment stock, setting a target price of Rs 180 per share. The settlement with Sony India is viewed positively by UBS as it removes a significant overhang, potentially benefiting the company's stock performance.

To recall, Sony Pictures Networks India (SPNI) terminated a proposed $10 billion merger deal with Zee Entertainment earlier this year, calling off a December 2021 agreement. Sony sought a $90 million termination fee on account of alleged breaches by Zee Entertainment of the terms of the merger agreement.

Zee had also sought a termination fee of $90 million ( Rs 750 crore) from SPNI and its entity Bangla Entertainment Pvt. Ltd. (BEPL) in May.

"While this settlement does remove a key overhang, we believe that a meaningful re-rating should happen in case of a new partner/buyer comes in. Lack of any major strategic investor during the recent fund-raise does not inspire confidence either," said Emkay Global as it maintained a 'reduce' rating on the stock with a target price of Rs 150 per share.

Also Read | Zee Entertainment stock jumps 15% as co settles merger termination disputes with Sony

Since the development came in during market hours on August 27, Zee Entertainment shares surged over 11 percent to close at Rs 150.90 on the National Stock Exchange (NSE). So far this year, the stock has plunged 47 percent, underperforming benchmark Nifty which has gained around 14 percent during this period.

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