Sony Pictures Networks India, Zee Entertainment sign definitive agreements to merge

Mumbai (Maharashtra) [India], December 22 : Sony Pictures Networks India Private Ltd (SPNI) and Zee Entertainment Enterprises Ltd (ZEEL) on Wednesday said that they have signed definitive agreements to merge ZEEL with and into SPNI and combine their linear networks, digital assets, production operations and program libraries.
In a joint statement, the two companies said that the agreements follow the conclusion of an exclusive negotiation period during which ZEEL and SPNI conducted mutual due diligence.
"Under the terms of the definitive agreements, SPNI will have a cash balance of USD 1.5 billion at closing, including through infusion by the current shareholders of SPNI and the promoter founders of ZEEL," it said.
This is aimed at enabling the combined company to drive sharper content creation across platforms, strengthen its footprint in the rapidly evolving digital ecosystem, bid for media rights in the fast-growing sports landscape and pursue other growth opportunities.
After closing, the new combined company will be publicly listed in India.
The closing of the transaction is subject to certain customary closing conditions, including regulatory, shareholder, and third party approvals.
As part of the agreement, Sony Pictures Entertainment Inc (SPE), of which SPNI is an indirect subsidiary, will pay a non-compete fee to certain promoter founders of ZEEL, which will be used by them to infuse primary equity capital into SPNI.
This will entitle the promoter founders of ZEEL to acquire shares of SPNI, which would eventually equal approximately 2.11 per cent of the shares of the combined company on a post-closing basis.
"After the closing, SPE will indirectly hold a majority 50.86 per cent of the combined company, the promoters (founders) of ZEEL will hold 3.99 per cent, and the other ZEEL shareholders will hold a 45.15 per cent stake," they added.
As part of the definitive agreements, the promoters (founders) of ZEEL have agreed to limit the equity that they may own in the combined company to 20 per cent of its outstanding shares.
"This construct does not provide the promoters (founders) of ZEEL any pre-emptive or other rights to acquire equity of the combined company from the Sony Group, the combined company or any other party. Any shares purchased by the promoters (founders) of ZEEL, must be in compliance with all applicable laws including any pricing guidelines," the release reads.
Under the stewardship of the Sony Group, a global leader in consumer technologies, gaming and entertainment, the combined company is expected to be able to better compete with the world's largest streaming players.
ZEEL's chief executive Punit Goenka will lead the combined company as its Managing Director and CEO.
The majority of the board of directors of the combined company will be nominated by the Sony Group and will include the current SPNI Managing Director and CEO, NP Singh.
On closing, Singh will assume a broader executive position at SPE as Chairman, Sony Pictures India (a division of SPE) reporting to Ravi Ahuja, SPE's Chairman of Global Television Studios and SPE Corporate Development.
Commenting on this development, Punit Goenka, MD and CEO of ZEE Entertainment Enterprises Ltd. said, "It is a significant milestone for all of us, as two leading media and entertainment companies join hands to drive the next era of entertainment filled with immense opportunities. The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms. I am immensely grateful to the teams at ZEEL, SPE and SPNI for their efforts that swiftly led us to this point within the stipulated timelines. This merger presents a significant opportunity to jointly take the businesses to the next level and drive substantial growth in the global arena."
"I look forward to working with the guidance of the esteemed members of the combined company's board to unlock the potential of this merger, and I wish NP Singh all the best in his new role at SPE. His contribution to the Indian media and entertainment industry has been invaluable. I am most certain that our collective wisdom, rich experience and expertise will lead to a more value accretive and exciting company for our shareholders and employees, and a more engaging one for our customers and partners," said Goenka.
Ravi Ahuja, SPE's Chairman of Global Television Studios and SPE Corporate Development said, "Today marks an important step in our efforts to bring together some of the strongest leadership teams, content creators, and film libraries in the media business to create extraordinary entertainment and value for Indian consumers."
"I want to thank Punit and his team at ZEEL and the small army of people at SPE and SPNI who have worked so hard to get us to this point. I especially want to thank N.P. Singh, who presented us with the idea to explore this merger well over a year ago. N.P. has done extraordinary work building SPNI to what it is today, and we look forward to continuing our work with him in his new role after closing," Ahuja added
NP Singh MD and CEO, SPNI said that this merger will create a company that's best in class and will redefine the contours of the media and entertainment industry.
"As a representative of SPE on the Board of the new merged company, it will be my endeavour to provide strategic guidance and support to the company's operating team in achieving our vision. I am also excited at the opportunity of being appointed, Chairman, Sony Pictures India, to oversee SPE's investments and craft a wider footprint for Sony in India," he added.
SPE was advised on this transaction by Morgan Stanley, KPMG Corporate Finance, and Shardul Amarchand Mangaldas & Co. ZEEL was advised by KPMG, JP Morgan, Trilegal and Boston Consulting Group.