Zee Entertainment Enterprises and Culver Max Entertainment, also known as Sony Pictures Networks India, may consider appointing an interim chief executive officer (CEO) to ensure the merger is completed on time, legal experts and proxy advisory firms said.
The deadline for the merger scheme of arrangement concludes on December 20. Recent reports have suggested that there have been differences of opinion between Sony and Zee over the CEO of the merged entity.
While the original merger scheme of arrangement, announced in December 2021, had said that Punit Goenka, MD & CEO of Zee Entertainment, would lead the merged entity, things have a taken a different turn after the duo — Goenka and his father Subhash Chandra — found themselves under regulatory glare from the Securities and Exchange Board of India (Sebi) over allegations of fund diversion. Last month, the Securities Appellate Tribunal (SAT) overturned a one-year ban on Goenka from holding directorships in Zee group companies.
While Sebi has sought 8 months to complete the investigation, with the merger deadline slightly-over a month away, some tough decisions may have to be taken. HP Ranina, senior corporate lawyer, believes that Goenka may have to give up his ambitions of becoming CEO of the merged entity, at least for now, if the merger has to sail through.
“The issue here is that he is under investigation by the markets regulator (Sebi). While his argument is that the recent SAT order has paved the way for him to become the head of the merged entity, the Sebi investigation may take a life of its own. Even it is completed within the stipulated 8 months, the final outcome may not be favourable to him. Sony is trying to avoid loss of face if such a scenario emerges,” Ranina says.
Valued at $10-billion, the merger, amongst the largest in the domestic media and entertainment industry, will see the coming together of over 70 TV channels, two video streaming services (Zee5 and SonyLiv) and two film studios (Zee Studios and Sony Pictures Films India), sector experts said.
Sony is pushing for its long-time India MD & CEO NP Singh to take over as the head of the merged entity. Well-regarded for his clean image, Singh has steered Sony as its India CEO for a decade and prefers keeping a low profile within the industry.
“It would be a tragedy if the merger process is called off due to the issue concerning leadership. As the competitive intensity in the industry has increased, it would be a lose-lose situation for both if issues are not sorted out quickly. Both parties therefore will have to find a way to make things work,” says Shriram Subramanian, founder & MD of InGovern, a proxy advisory firm.
Last week, Goenka said in an earnings call that the media firm was in active engagement with Sony and that it understood the value of the merger and the opportunities it would unlock for shareholders.
“We are in active engagement with Sony on various parts of the scheme to be finally implemented after getting all the approvals,” Goenka said.
As per the scheme of arrangement, Zee will be delisted from the stock exchanges. The merged company will be relisted as Sony-Zee wherein 100 shares of Zee will enable shareholders to get 85 shares of the merged entity.