Invesco to sell 5.51% stake in Zee Entertainment; share jumps 6%

Shares of Zee Entertainment Enterprises Ltd (ZEEL) rallied over 6% in early trade on Tuesday, in sync with the broader market, amid report that Invesco Developing Markets Fund would sell a 5.51% stake in the company via a block trade today. Invesco to pare half of its stake in ZEEL, which currently stands at 10.14%, that could fetch the investor as much as $169.5 million (around ₹1,300 crore).

This is going to be the second block deal in seven months by Invesco after it sold 7.8% stake in ZEEL in April this year for ₹2,092 crore. It holds the stake in ZEEL through OFI Global China Fund.

As per the report, Invesco will offload 52,935,068 equity shares, or 5.51% of the total shares outstanding in the company, at a price range of ₹250-₹263.7 per share. The floor price is at a discount of 5.32% (at the lower end of the price band) to Monday's closing price of ₹263.30 per share on the BSE.

On Tuesday, Zee Entertainment share price opened higher at ₹278.70, against the previous closing price of 263.30 on the BSE. During the first two hours of trade so far, the stock gained as much as 6.2% to ₹279.75, driven by a surge in volume trade. As many as 8 lakh shares changed hands over the counter on the BSE as compared to the two-week average volume of 11.3 lakh stocks.

With a market capitalisation of ₹26,303.8 crore, the stock currently trades 26% lower than its 52-week high of ₹378.60 touched on December 15, 2021. The share price hit a 52-week low of ₹200.50 on May 20, 2021. The stock has delivered a negative return of 12% in the past one year, while it has fallen 15.5% on a year-to-date (YTD) basis. In the past one month, the counter has risen 2.4%, while it has gained nearly 2% in a week.

Last Friday, the company received shareholders' approval for the proposed merger with Sony Pictures Networks India Pvt. Ltd. The proposed merger deal has already received a nod from the Competition Commission of India (CCI) on October 4, 2022. It also got a green signal from the domestic bourses - Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) - in July 2022.

In December last year, Zee Entertainment and Sony Pictures Networks India Private Limited (SPNI) inked a deal to merge the two entities to create the largest entertainment network in the country. The merger would make the combined entity the largest media conglomerate in India with a 28% share (leaving behind the current market leader, Disney-Star, with a 22% share). The combined entity will include 75 TV channels, two film studios – Zee Studios and Sony Pictures Films India, as well as two video streaming services – ZEE5 and Sony LIV, and digital content studio Studio NXT, which is currently under Sony Pictures Network.

Once the regulatory approvals come through Sony Pictures Entertainment through its Indian entity, SPNI, will indirectly hold a majority of 50.86% of the combined company, the promoters (founders) of ZEEL will hold 3.99%, and the other ZEEL shareholders will hold 45.15% stake. The new board would comprise nine members, out of which five would be nominated by SPNI, three would be independent members and Punit Goenka would also get a position in the board.

Goenka, the incumbent ZEEL CEO, will lead the merged entity as its managing director and CEO. Sony Group will nominate most of the directors on the board of the new entity, including N.P. Singh, the current SPNI managing director and CEO. Post merger, 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.