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Zee Entertainment Enterprises Ltd hit back at Invesco on Tuesday, 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 to the stock exchanges, Zee said Goenka shared with the board a note giving the details of 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.

“The deal was first presented to me over a call scheduled on 23 February 2021 at 6pm IST, with Mr. Aroon Balani and Mr. Bhavtosh Vajpayee," said a note written by Goenka, disclosed by Zee. According to the note, under the proposed deal, structured by Balani, who is a vice-president at Invesco, and Vajpayee, a technology analyst at Invesco, Zee was to merge with “certain entities owned by a large Indian group (Strategic Group)".

The letter, however, didn’t mention the name of the group.

“The value of entities owned by the Strategic Group was considered at 17,500 crore; the Strategic Group would infuse approx. 14,000 crore of cash into the merged entity, pursuant to which the shareholding of the Strategic Group in the merged entity would increase to approx. 60%," the note said. “I was to continue as the MD (managing director) and CEO (chief executive officer) 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."

Zee’s shares were then trading at 220 a share, translating into a market cap at 21,129 crore.

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 board of Zee’s proposed $1.6 billion takeover by Sony.

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

Goenka claims in the letter that after discussing for over a month with Invesco’s executives and with representatives of the unnamed Indian media group, he decided to reject the transaction.

“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 shareholders; 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," Goenka said.

“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 could be the 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," Goenka said in his note.

Separately, a statement from Zee said that “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".

An email sent to Invesco went unanswered. Calls and text messages to Vajpayee went unanswered while Balani could not be contacted.

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