Zee Entertainment Enterprises hosted a conference call on Dec 22,2022. In the conference call the company was represented by Mr Punit Goenka-MD & CEO and Mr Rohit- CFO.

Key Takeaway of the call

ZEE Entertainment Enterprises has signed a definitive agreement to merge with Sony Pictures Networks India (SPNI) and the Zee Entertainment Enterprises board has approved the same.

If the merger goes through, the merged entity will be the one of the largest entertainment networks with 75 channels, 2 video services (ZEE5 and SONY LIV), 2 film studios(Zee studios and Sony Pictures Films India), a digital content studio(Studio Nxt) and programming libraries.

Till the merger OTT platforms of Sony and Zee will be run as is basis.

After, the merger Sony Pictures Networks India will hold majority 50.86% stake in the merged entity, 3.99% will be held by ZEE Entertainment Enterprises promoters and 45.15% will be held by public shareholders.Essel Group will continue to be the promoters of the merged entity and promoters cannot participate in the ESOP schemes.

Mr Punit Goenka will continue as the MD and CEO of the merged entity. Majority of Board of directors of the merged entity will be nominated by Sony including N P Singh, the current Sony Pictures Networks India managing director.

Sony will invest around US $ 1.5 billion as investment into the merged entity which is expected to go to content including IPL rights, originals and films and technology. However, no investment will be made towards last mile connect. The valuation was derived on the relative basis, business plans and cash infusion.

The available capital will more than be sufficient for payment of advance towards sports business and digital business.

Capital allocation decisions of the new merged entity will be taken by the new board. The company will continue to be a dividend paying company going forward as well.

Synergy Benefit: Overall the synergy benefit is expected to be around 6-8% of which large part will come from revenue side in the first financial year and cost side synergy is expected to be derived in later stage.

Brand: Brand Zee will also get merged with the new entity. Prudent call on the merger of brands will be taken at the right time.

Regulatory Approval: It might take 8-10 months for the company to get all the regulatory approvals and complete the merger process. Regulatory approvals include approvals from Competition Commission of India, Stock Exchanges, National Company Law Tribunal and from Ministry. Equity shares of Zee Entertainment Enterprises will be de-listed from the exchanges for 3 weeks which might be in the last phase of the merger process and will be re-listed.

Tax Implication: Merger is tax neutral for all the shareholders.

Contingent liability: The contingent liability in Zee Entertainment Enterprises will get transferred and treated in the same way in the merged entity.

Content amortization: There is a difference in content amortization between the company and Sony primarily in movie content. Further with respect to amortization, the new board of merged entity will take a call and will be made public.

Until merger all the strategies of both the entities will not converge.

Music business and movie production business of the Sony is outside the merged entity.

There will not any be any liability for Zee Entertainment Enterprises if it does not obtain share holder approval for merger. But there will be liability and penalty if there is breach of exclusive obligation on each other. (Sony and Zee)