Zee Entertainment Enterprises’ proposed merger with Sony may have to wait a little longer with no outcome yet on appeals filed by the former’s promoters in the Securities Appellate Tribunal (SAT). Essel Group chairman Subhash Chandra and Zee Entertainment Enterprises MD and CEO Punit Goenka have filed appeals against the Securities and Exchange Board of India’s (Sebi’s) June 12 directive banning them from holding key positions in any listed entity.
While some media experts say that the matter in SAT and the merger hearing in the NCLT are not linked, legal experts say they are.
Satish Kishanchandani, managing partner, Pioneer Legal, a Mumbai-based corporate law firm, says, “The common link here is Punit Goenka. In the event, the SAT passes an adverse ruling against Goenka, he has the option of moving the Supreme Court. At the same time, the merger scheme will have to be amended, with the name of a new head proposed for the merged entity. This amended scheme will have to be placed in the NCLT for its approval. All of this will take time,” he said.
Kirti Dua, partner, ANG Partners, Advocates and Solicitors, a Delhi-based law firm, says there could be a delay of at least three to six months in seeking fresh approvals for the amended merger scheme.
“There is an important aspect here, which is shareholder approval. While approvals from the CCI or the NSE, BSE and Sebi will not be needed if a new head is being proposed for the merged entity, shareholders’ approval will be required in addition to NCLT’s go-ahead,” she said.
On Tuesday, the SAT reserved its order in the matter after hearing arguments for two weeks. It did not specify a day for the final order. As of Wednesday, the SAT order hadn’t come, which begs the question: What happens to the proposed Zee-Sony merger?
Zee is currently in the last leg of seeking approvals for the merger with Sony, which will create a $10-billion media company.
Goenka will lead the company as per the current merger scheme, which is in the National Company Law Tribunal (NCLT) for its approval. However, the NCLT has already deferred the case twice in the last two weeks and has posted the matter for July 6. In May, NCLT had asked the NSE and BSE to reassess their initial approvals to the proposed merger, based on an earlier Sebi ruling pertaining to an Essel Group company. The NCLAT had set aside NCLT’s ruling, prompting the Sony management in Japan to indicate that the proposed merger could be completed by the end of the first half of FY24.
In statements to the media last week, Goenka indicated that the merger would go through whether or not he remained MD & CEO of the merged entity.
“The ZEE-Sony merger holds immense significance, regardless of my position as CEO. The resulting entity will be under Sony’s control, and they have chosen to retain me as a promoter, MD, and CEO,” he said.
Goenka’s statement came after Sony had indicated that it was taking the Sebi ban on Chandra and him seriously. It would monitor developments closely that could potentially affect the deal, Sony said.
Announced in December 2021, the merger, according to analysts, will bring together over 70 TV channels, two video streaming services (Zee5 and SonyLiv) and two film studios (Zee Studios and Sony Pictures Films India).
Sony is also infusing $1.5 billion in cash and will have representation on the board of the merged entity as per the current merger scheme. It will indirectly hold nearly 51% in the merged entity, while Zee promoters will hold 3.99%, and other Zee shareholders will hold a 45.15% stake.