ZEE shares drop 3.4% ahead of Sony’s final meet on merger

Zee Entertainment Enterprises Ltd stock will be in focus today in the wake of the Sony Group Corp meeting, which is set to finally decide the fate of the proposed $10-billion deal with Punit Goenka-led Indian media conglomerate.

Speculations are rife that the merger deal could collapse amid complications in finalising CEO Punit Goenka's role in the new company. However, Sony on January 10, 2023, clarified that talks with Zee will continue till January 20, 2022. Zee also reiterated its commitment to the merger and said negotiations were still in progress.

The ZEE board was supposed to hold the final round of talks with Sony Pictures Networks India, now known as Culver Max Entertainment on January 18 evening. Following this, Sony's board in Tokyo will pass a resolution in favour or against the deal, depending on Zee's position on the issues of conflict.

If the proposed merger is approved, Sony will hold a 53% stake in the company. Zee's market share in the Indian entertainment and broadcasting business is 18%, while of Sony's market share is at 6%.

Ahead of the final announcement, ZEE fell as low as 3.4%. The ZEE shares opened a gap down at ₹252 on the BSE and fell further to an intra-day low of ₹249. At the current share price of ₹241.65, the ZEE shares are trading 19.3% below the 52-week high of ₹299.5 touched on December 12, 2023. Its m-cap has also shrunken to ₹23,167 crore.

Zee shares are trading down at five-day, 10-day, 20-day, 30-day, 50-day, 100-day and 200-day moving averages.

Although ZEE has received all necessary approvals for the proposed merger with Culver Max, the tiff emerged on whether ZEEL's CEO should lead the new company or not. Notably, the 2021 agreement signed between both parties had stated Goenka would head the new company, though developments in the aftermath of the deal might have triggered Sony to change its stance.

Just last month, ZEE sought more time for the proposed merger. The $10-billion deal was announced in December 2021 to merge the two big entities to create the largest entertainment network in the country. However, ZEE faced several hurdles and delays due to ongoing legal battles with capital markets regulator SEBI.

In October 2023, in a breather to Goenka, the Securities Appellate Tribunal (SAT) set aside an order barring him from holding key managerial positions in the company and other associated firms. The appellate tribunal, however, directed him to cooperate with the SEBI investigation. So the uncertainty over the outcome of the SEBI probe still persists.

However, brokerage major Prabhudas Lilladher's media & entertainment preview for the October-December quarter FY24, said despite the delay in the merger, ZEE remained its “preferred pick” in the media & entertainment space. For Q3 FY24, it expects ZEEL to report a 1.9% YoY fall in top-line to ₹2,070 crore, with an EBITDA margin of 10.1%.