Zee Entertainment Enterprises Ltd (ZEEL) said on Wednesday its board of directors has unanimously provided an in-principle approval for the merger with Sony Pictures Networks India (SPNI).
"The board has evaluated not only on financial parameters but also on the strategic value which the partner brings to the table. The board concluded that the merger will be in the best interest of all the shareholders and stakeholders," it said in a statement.
"The merger is in line with ZEEL's strategy of achieving higher growth and profitability as a leading media and entertainment company across South Asia."
The board has authorised the management of ZEEL to activate the required due diligence process.
The shareholders of SPNI will hold a majority stake in the merged entity. The shareholders of SPNI will also infuse growth capital into SPNI as part of the merger such that SPNI has about USD1.575 billion at closing, for use in pursuing other growth opportunities.
Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25 per cent in favour of ZEEL.
However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07 per cent of the merged entity to be held by ZEEL shareholders and the balance 52.93 per cent of the merged entity to be held by SPNI shareholders.
ZEEL and SPNI have entered into a non-binding term sheet to combine both companies' linear networks, digital assets, production operations and programme libraries.
The term sheet provides an exclusive period of 90 days during which ZEEL and SPNI will conduct mutual diligence and finalise definitive agreement(s). The merged entity will be a publicly listed company in India.
As part of the transaction, Punit Goenka will continue to be the Managing Director and CEO of the merged entity. Further, certain non-compete arrangements will be agreed upon between the promoters of ZEEL and the promoters of SPNI.
According to the term sheet, the promoter family is free to increase its shareholding from the current 4 per cent to up to 20 per cent in a manner that is in accordance with applicable law. Majority of the board of directors of the merged entity will be nominated by Sony Group.
ZEEL Chairman R Gopalan said: "As a board that encompasses a blend of highly accomplished professionals having rich expertise across varied sectors, we always keep in mind the best interests of all the shareholders and ZEEL. We have unanimously provided an in-principle approval to the proposal and have advised the management to initiate the due diligence process."
( With inputs from ANI )
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