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NEW DELHI: Reliance Industries Ltd had made an offer to merge some of its media business with Zee Entertainment Enterprises Ltd, a deal that Zee’s managing director Punit Goenka had rebuffed at the start of the year, Invesco has said.

“We wish to make clear that the potential transaction proposed by Reliance (the “Strategic Group" referenced but not disclosed in the 12 October 2021 communication by Zee) was negotiated by and between Reliance and Mr. Goenka and others associated with Zee’s promoter family," said a spokesperson for Invesco on Wednesday. “The role of Invesco, as Zee’s single largest shareholder, was to help facilitate that potential transaction and nothing more"

“We reject in full the assertions made by Zee in its release on 12 October 2021. We specifically note that the implication that we as a shareholder would seek out a transaction for Zee that is dilutive to the long-term interests of ordinary shareholders, including ourselves, simply defies logic," said a spokesperson for Invesco.

Late on Tuesday, Zee Entertainment Enterprises hit back at Invesco, alleging that the American investor’s activism, including demanding a special shareholder meeting, followed Zee managing director Punit Goenka rejecting a deal that its largest shareholder proposed earlier this year.

In a six-page letter disclosed to the stock exchanges, Zee said Goenka shared with the board a note which detailed Invesco’s proposed transaction under which Zee’s current shareholders would have held 40% while an unnamed Indian group, would have controlled 60% after infusing 14,000 crore in cash in the merged entity.

“This was the first time that Invesco informed me about the merger deal and the fact that a public shareholder was negotiating a merger deal on behalf of the Company (Zee) without any authority/ involvement of the Board and Management, took me by surprise," said Goenka in a note shared by Zee.

Zee’s shares traded at 220 apiece on Wednesday, giving the company a market cap of 21,129 crore.

“[T]he value of entities owned by the Strategic Group was considered at - INR 17,500 Crores; the Strategic Group would infuse approx. INR.14,000 crores of cash into the Merged Entity, pursuant to which the shareholding of the Strategic Group in the Merged Entity would increase to approx. 60%," said the note. “I was to continue as the MD and CEO of the Merged Entity; the promoter group of the Company would be given 3.99% shareholding of the Merged Entity; and I was further offered employee stock options (ESOPs) representing up to 4% of the shareholding of the Merged Entity. Accordingly, the existing promoter group of the Company would hold up to 7-8% in the Merged Entity"

Tuesday’s development comes less than a day after Justin Leverenz, chief investment officer of Invesco Developing Markets Equities, wrote an open letter to shareholders of Zee, raising concerns over the proposed $1.6 billion takeover by Sony.

On Monday, Invesco, which owns 17.88% in Zee, said the terms of the Sony-Zee merger, announced on 22 September, appeared to favour the group’s founding family, which owns 3.99%, at the expense of other investors.

“I did not present the terms of the deal to the Board because (a) I was not provided with any information on the valuation justifying the deal; (b) in my considered view as the MD and CEO of the company, the deal was not in the best interests of the public share holders; and (c) I was uncomfortable with the manner in which the deal was being pushed through by Invesco, being public shareholders of the Company, without adequate information," said Goenka.

“Looking at the developments over the last 48 hours, and with Zee’s petition expected to be heard before the Bombay High Court on Wednesday, we believe this is start of what could become one of the ugliest battles between an investor and promoter in India’s corporate history," said an investor in Zee, on the condition of anonymity.

“The Requisition Notice and the events that have followed since, reaffirm the position taken by the Board that this is a blatant attempt by Invesco to assume de-facto control of the Company, in violation of applicable takeover regulations," said Goenka is his note.

Separately, a statement from Zee said, “the Board is constrained to conclude that Invesco's actions over the past few weeks have been motivated by circumstances that are extraneous to the Company's business or performance, or issues of corporate governance or public interest."

This copy will be updated with a comment from Reliance Industries.

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