The Zee Entertainment-Sony Pictures India merger seems to have taken a rocky road, as Invesco Developing Markets Fund, its largest shareholder, renewed its demand to schedule an extraordinary general meeting (EGM) to reconstitute the Subhash Chandra-backed firm’s board and for the removal of MD and CEO Punit Goenka.
According to a Business Standard report, Invesco in a letter dated September 23 to the Zee Entertainment Enterprises (ZEEL) board reiterated its demand for the EGM to remove non-independent directors and requested the introduction of six additional independent ones. Earlier this month, Invesco had also asked for an EGM for the removal of ZEEL’s CEO Goenka along with two board members.
Sony’s Indian unit last week had signed a non-binding offer to buy ZEEL. The offer is currently in a 90-day exclusive talks period, where both the parties will negotiate a binding agreement. The prospective talks would also decide upon a shareholding pattern, as in the newly merged entity Sony India shareholders would hold close to 53 per cent stake, while the rest will be under Zee’s holders. Additionally, Sony would nominate a majority of the board.
However, Invesco and OFI Global China Fund LLC, which together hold about 17.9 per cent stake in the network, referred to the non-binding merger announcement and said that the deal was struck in “erratic manner.” The letter also urged ZEE to not violate its statutory obligations to convene the EGM as requisitioned by Invesco on September 11.
ZEE’s board has a deadline to call the EGM in about three weeks. On failure, Invesco holds the right to call the meetings within six months. However, legal experts cited rigidity from both companies may lead to a legal battle.
Invesco has neither rejected nor shrugged off the deal negotiations with Sony but highlighted in the letter that the business of ZEEL is valuable, “whether on its own or in strategic alignment with partners such as Sony”.
Meanwhile, ZEEL will also take necessary legal action when required, a representative for the company said without confirming if the media conglomerate has received Invesco’s letter. Also, an Invesco spokesperson didn’t immediately reply to an emailed request for comment outside of business hours, moneycontrol.com reported.