Sony deal lifts Zee Leisure 31%

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The shares of Zee Leisure Enterprises Ltd rallied 31 per cent on Wednesday after the announcement of a merger with Sony Footage.

Zee Leisure Enterprises Ltd closed at ₹337.10 on the BSE, up ₹81.45 or 31.86 per cent on the BSE. It recorded a contemporary 52-week excessive of ₹355.40 through the day. It had opened at ₹281.20 as towards the earlier shut of ₹255.65. The corporate’s m-cap stood at ₹32,378.98 crore.

On the NSE, it closed at ₹333.70, up ₹78.00 or 30.50 per cent. It recorded a contemporary 52-week excessive of ₹355.35.

Zee’s rally additionally pushed the Nifty Media Index up 13.57 per cent to 2,204.75. Nifty Media additionally recorded a contemporary 52-week excessive of two,267.95 through the day led by Zee.

Sony Footage Networks India (SPNI) and Zee Leisure Enterprises Ltd. (ZEEL) immediately introduced that they will merge their operations. The businesses have entered into an unique, non-binding Time period Sheet to mix each corporations’ linear networks, digital belongings, manufacturing operations and program libraries.

Whereas Subhash Chandra-backed Zee will personal 47.07 per cent stake within the merged entity, the steadiness 52.93 per cent is to be held by SPNI shareholders. In accordance with the time period sheet, Zee’s promoter household will maintain 4 per cent stake which could be elevated to twenty per cent.

Sony Footage Leisure, the mum or dad firm of SPNI, would make investments progress capital in order that SPNI has a money steadiness of roughly $1.575 billion at closing to be used to reinforce the mixed firm’s digital platforms throughout know-how and content material, means to bid for broadcasting rights within the fast-growing sports activities panorama and pursue different progress alternatives.

The non-binding Time period Sheet supplies an unique negotiation interval of 90 days throughout which ZEEL and SPNI will conduct mutual diligence and negotiate definitive, binding agreements. The mixed firm could be a publicly listed firm in India. Sony Footage Leisure would maintain a majority stake within the mixed firm whereas the present ZEEL Managing Director & CEO Punit Goenka is to guide the mixed firm.

The information comes quickly after Invesco Growing Markets Fund (previously Invesco Oppenheimer Growing Markets Fund) and OFI World China Fund LLC, which collectively maintain 17.88 per cent in Zee Leisure referred to as for a unprecedented normal assembly of the shareholders of the corporate to hunt the ouster of Subhash Chandra’s son Punit Goenka because the director of the corporate.

Analysts bullish

In accordance with analysts, the merger could be perceived as a constructive for the corporate’s inventory.

Santosh Meena, Head of Analysis, Swastika Investmart Ltd mentioned, “It was anticipated that Punit Goenka is not going to simply lose his positions and Zee could give you a white knight or different counter supply however the market knew that it is going to be a win-win state of affairs for Zee shareholders whether or not there will likely be any change in administration and board or another participant come to purchase a majority stake within the firm.”

“The current announcement of a take care of Sony will likely be a really constructive set off for Zee Ltd as it can have a top quality promoter and that can ease the difficulty of company governance within the firm. Although the deal is a non-binding settlement so it can take a while for extra readability however this deal will carry a superb synergy for each the corporate to develop their companies and the mixed entity will turn out to be the most important participant within the trade. The inventory is buying and selling at very enticing valuations and it is without doubt one of the strongest and FIIs favorite shares within the media area and if this deal concludes then we may even see an enormous rerating within the counter,” added Meena.

Ashwin Patil, Sr. Analysis Analyst (media) at LKP Securities mentioned: “Sony is robust within the Hindi GEC phase (particularly in non-fiction area) the place Zee is weak. Zee is robust in motion pictures (throughout genres) and regional GEC area. Zee has ~18% community viewership share and Sony ought to be ~10-12% in our view. Moreover, Sony is robust in Sports activities as properly. Thus it might be a superb strategic match from broadcast, digital and content material perspective.”

In accordance with Patil, Zee is prone to get considerably re-rated. It presently trades at ~23x/19x FY22/FY23 earnings.

Ravishu Shah – Managing Director & Co-Head Valuation, RBSA Advisors mentioned, “Merger phrases envisage non-compete association between the promoters of Zee Leisure Enterprises Restricted (“ZEEL”) and the promoters of Sony Footage Networks India (“SPNI”), which can present an incremental stake of ~2.1% to the ZEEL promoters within the merged firm (indicative worth of ~1,075+ crore).”

“It will likely be fascinating to see how Regulators and Institutional shareholders reply to such non-compete association with the promoters of a listed firm as a part of the merger course of. It might be pertinent to notice that SEBI Takeover code doesn’t allow differential remedy between the promoter and public shareholders,” mentioned Shah.

“Additionally, acquiring ZEEL shareholder approval for the proposed merger and for the continuation of MD and CEO of ZEEL because the MD and CEO of the merged entity for subsequent 5 years could entail challenges contemplating the present burdened relationship between sure institutional shareholders of ZEEL and ZEEL Board/ Administration. On an total foundation, the merger is anticipated to offer strategic synergies and the money steadiness of practically $1.57 billion of SPNI will present progress impetus to the merged entity. Additionally, the proposed structure of the Board of the merged entity (majority administrators to be appointed by Sony), could assist allay the issues of sure institutional shareholders,” added Shah.

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