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Zee: Next one month crucial as brinkmanship with Invesco continues

Zee Entertainment’s board has time till October 2 to call for an EGM and another 21 days to hold it. Invesco’s letter to the board reiterates the demand for an EGM for the re-constitution of the board, and questions the board on the strategic decision of September 22 to explore a merger with Sony.

September 27, 2021 / 11:02 PM IST

The next one month is going to be extremely crucial for the fate of Zee Entertainment Enterprises (ZEEL) as a game of brinkmanship is on between Invesco and the ZEEL board. Invesco has sent a fresh salvo to the board to hold the extraordinary general meeting (EGM) it had sought and questioned the locus standi of the board in taking a strategic decision on the merger talks with Sony Pictures Networks India (SPNI).

Invesco made the demand in a letter on September 23.

As per rules, the ZEEL board has time up to October 2 to call for an EGM, which is 21 days from Invesco's requisition and another 21 days to hold it. EGM has to be called within 45 days with a 21-day notice period. So, the company can push it to a maximum period of 24 days from receipt of investor request.

It’s a race against time for Zee to get certainty on the proposed merger with Sony to gather shareholder vote in its favour.

Abhneesh Roy of Edelweiss says: “Invesco’s letter is a bit surprising. Since ZEEL has time to announce the EGM, we hope to hear more from ZEEL on the EGM in the coming days.”


On the ZEEL board’s right to take a call on the merger proposal, which was termed as “symptomatic of the erratic manner…” experts say that the ZEEL board is well within its right to continue with business as usual till the EGM results are announced.

Proxy advisory firm SES’ JN Gupta says, “It is not like an election that all work will have to stop till the EGM is conducted. I disagree with the concept that all board decisions should be on hold till the EGM is held. Yes, big decisions should not be taken if the board is questioned, but it has no meaning since ultimately the shareholders’ vote will decide the outcome.”

Invesco’s letter

Invesco Developing Markets Fund and OFI Global China Fund LLC, which together hold 17.88 percent of the company’s shares, had requisitioned an EGM to reconstitute the board of Zee Entertainment on September 11. In its latest letter, the shareholder retaliated to the September 22 announcement by Zee to consider merger talks with Sony.

“A newly constituted board, supported by the strength of independence, will be best suited to evaluate and oversee the potential for strategic transactions, like the one announced on 22 September 2021, on a non-binding basis, as well as to make determinations on the future leadership of the company. We note that the disclosure of 22 September 2021 refers to the future board composition of the company at a time when the current composition of the board is subject to shareholder vote on the back of our EGM requisition,” the letter said.

“The board is seized of the matter. The company will take necessary action as per law,” Zee said in its response.

Moneycontrol has sent a detailed query to Invesco and is awaiting response.

Goenka’s fate

According to the terms of the proposed merger, Punit Goenka will continue as MD and CEO.

“Invesco was unhappy about the governance of Zee due to group company issues. So, Goenka, as the proposed MD of the merged entity, should not be a concern,” InGovern said.

Many industry experts see the proposed strategic partnership with Sony as a masterstroke to fight off Invesco’s challenge to oust Goenka, who is part of the promoter Essel Group, which owns a 3.99 percent stake in Zee.

Board set to change

While shareholders will decide which proposal to accept, the reconstitution of Zee Entertainment’s board is imminent with the proposed merger giving Sony a controlling stake in the combined company.

“A majority of the board of directors of the merged entity will be nominated by the Sony Group,” Zee said in a statement.

Invesco and OFI Global sought the appointment of Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli and Gaurav Mehta as independent directors on Zee’s board.

They had also asked for the removal of Manish Chokhani and Ashok Kurien from the board, ahead of the company’s annual general meeting and both resigned before their re-appointment was taken up at the shareholders’ meeting on September 14.

Crucial voting

Voting at the EGM will be the most crucial part of this protracted battle and vote-gathering from both sides will be critical in deciding its outcome.

Ace investor Rakesh Jhunjhunwala’s RARE Enterprises and BoFA Securities picked up close to half a percent stake each during the surge in the Zee stock after Invesco’s EGM requisition. Any share purchase before the record date of the EGM will get a voting right.

The Essel Group holds only a 3.99 percent stake while Invesco and OFI Global have 17.88 percent. A lot will depend on which way the other investors swing.

Among the dominant institutional shareholders are Vanguard (5.8 percent), Life Insurance Corporation of India (4.9 percent), and Amansa Holdings (3.4 percent).

SBI Life Insurance holds 1.8 percent and HDFC Life Insurance has 1.66 percent.

The stake of others, including Government Pension Fund Global, City of New York Group Trust and SEI Trust Company ranges between 1.5 and 2 percent each.

Domestic mutual funds Nippon Life India Trustee, Mirae Asset Emerging Bluechip Fund, ICICI Prudential Equity Arbitrage Fund, Kotak Equity Arbitrage Fund and Aditya Birla Sun Life Trustee each own over 1 percent stake in Zee.

For the ZEEL board, it is now a race against time to give certainty on the deal to the shareholders to enable them to take a decisive decision if the EGM is called in the next few days.

Most equity participants suggest that the vote will happen based on the comparison between the proposals given by the two warring parties on the strength of the board and the prospects of the strategic deal.
Nisha Poddar is an Editor-M&A, CNBC-TV18
first published: Sep 27, 2021 03:50 pm
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