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In an escalation of battle over the Sony-Zee merger, Zee Entertainment on Tuesday informed the stock exchanges that two representatives from the company's largest shareholder Invesco have reached out to MD and CEO Punit Goenka in February with a proposal to merge Zee with certain entities owned by a "large Indian group".

However, Goenka felt that the deal with large Indian strategic group was overvalued and it would result in a loss to the stakeholders of the company.

"As per the deal presented to Punit Goenka, upon completion of the merger, the said strategic group would have held a majority stake in the merged entity and Punit Goenka would have been appointed as the MD and CEO of the merged entity," Zee said in a filing. (Check the full letter here)

Without naming the group, Zee said, when Punit Goenka expressed governance concerns in relation to the deal, especially surrounding the valuation gaps, he was informed by Invesco that the deal would be consummated with or without him.

Zee board, in its meeting held today, discussed the open letter addressed to them by Goenka.

Punit Goenka communicated to the board that, when the deal was presented to him, the shares of Zee were valued at 220 per share, with total valuation of the public shareholding of the company as 21,129 crore. The value of entities owned by the strategic group was considered at 17,500 crore.

Zee's shares are currently trading at 303.20 on NSE.

Further, the said strategic group would infuse approximately 14,000 crore of cash into the merged entity, pursuant to which the shareholding of the group would increase to around 60%, as per Goenka.

In addition, Goenka was also offered employee stock options (ESOPs) with no vesting conditions, representing approximately 4% of the shareholding of the merged entity.

However, Punit Goenka rejected the deal "on account of governance concerns in relation to the deal."

"In my view, the valuation attributed to the entities belonging to the strategic group was inflated by at least 10,000 crore," Goenka said.

Invesco along with OFI Global China Fund LLC holds a 17.88% stake in Zee and has been pressing for an extraordinary general meeting (EGM) to discuss various issues, including the removal of MD Goenka and appoint its nominees of the board of the company.

Earlier, in an open letter to Zee shareholders, Invesco has expressed concern about some of the terms of Sony India’s proposed purchase of Zee, which it claims favour the promoters over ordinary shareholders.

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