Confident shareholders will back merger: Gopalan

At a time when the promoters of Zee Entertainment Enterprises were pushed to the wall by the largest investor Invesco, seeking EGM to remove MD & CEO Punit Goenka and two other directors from the board, the chairman and other directors have unanimously given in-principle approval to explore the merger of the company with Sony Pictures Networks India. In an exclusive interaction with ET's Gaurav Laghate, Zee chairman R Gopalan spoke about the rationale behind the merger. Edited excerpts:What is ZEE board's view on the merger proposal?The board has taken an overall industry view and analysed the competitive environment in the media & entertainment (M&E) sector. Over the last few years, we have noted the significant changes in this ecosystem including the consolidation of large media companies and the deep investments being made by players in the content and technology domain, and how they have driven up the revenue potential and overall value for the companies and the sector at large.The board has also recognised the changes accelerated by digital adoption in the M&E ecosystem and the opportunities that are now available for higher growth in line with ZEE's strategic vision.In this context, we have carefully evaluated all the financial and strategic parameters of the merger proposal and it was unanimously agreed that the merger would accrue immense value for consumers, partners, employees and shareholders of both entities. The synergies that can be drawn between both the assets will help expand the reach, increase market share, generate higher revenue, which in turn only augurs well for shareholders. Based on all these factors, the board has given in-principle approval for the terms of the merger and to initiate the various steps as required. How is it beneficial for all the shareholders, including non-promoter minority shareholders?We have always kept the best interests of all our shareholders in mind, as part of our core decision-making process. SPN has been a formidable player in the M&E sector, and it is a financially sound partner with a strong strategic intent in the merged entity. On the other hand, ZEE in the last few years, has taken substantive steps to enrich governance and transparency in a granular manner by several notches, which now lays a strong foundation to form the merged entity. The merger will combine these two market leaders and that the merged entity will be listed in this country is a huge commitment to the minority shareholders. The term sheet states that the promoter group will get additional 2% shares from Sony to maintain their shareholding at 3.99%. Will this require shareholders' approval?All the necessary processes in a normal merger are being duly followed. The entire scheme of arrangement including the non-compete arrangement will be subject to approval by the shareholders as per the merger process. Overall merger will require a supermajority (75% votes). How confident are you of achieving this?The significant size of the merged entity and its leadership position in various entertainment genres will generate immense value for all the shareholders, and I am sure they have recognised this aspect and how it is beneficial to them in the long term. I am confident the shareholders will support the resolution as it benefits the company and their interests. How will this merger impact the business growth in the short to mid-term as well as long term?Based on the evaluation of the merger and the value the merged entity will bring in, I believe it will boost the growth of the business in the mid to long term. The merger would bring together two leading Indian media businesses, benefitting consumers in India and globally across content genres, from film to sports.The entertainment portfolios of both the companies are complementary, and the combined company would be a market leader across genres & languages in linear and digital distribution with significant growth opportunities for the business. It will also lead to the efficient global distribution of ZEE's key channels by Sony's global platform and the combined channels/content would certainly lead to higher demand. With growth capital being infused into the merged entity, it will further enable the company to significantly invest in digital platform growth and the acquisition and creation of large entertainment properties.

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