Zee-Sony merger: How Invesco's move to oust Punit Goenka sprung Subhash Chandra into action

It took a couple of calls from Subhash Chandra to Sony's bosses in Culver City, a 20-minute drive from Los Angeles, for the announcement of a merger between Zee Entertainment Enterprises Ltd and Sony Pictures Networks India.

There is a bit of a background here since both the companies were in dialogue for a potential deal ever since the Indian promoter ran into a problem after pledging his shares. That was two years ago, and Chandra knew that the situation could get out of hand. While the deal never fructified, Zee and Sony were in touch.   

The story is clearly a lot different today with Zee facing the ire of Invesco, an Atlanta-based global fund that holds over 17 per cent stake in the Indian entertainment major. Calling for Punit Goenka's ouster as the director of Zee Entertainment (Goenka is Chandra's son and MD and CEO of the company) was bad news for Chandra. Invesco had also called for an extraordinary general meeting (EGM) to go ahead with this.

Invesco proposed that six independent directors be appointed at the EGM, all chosen by it. Time was not on Chandra's side and the veteran of many a battle needed to fight another one at the age of 70.
 
Also Read: Boardroom potboiler at Zee: Can beleaguered MD Punit Goenka stave off shareholders demanding his exit?
 
The discussions between Zee and Sony had been going on for over a few months but gained steam last fortnight. Chandra was willing to accept Sony as the majority partner, but with a few riders -- his son Goenka would be the MD and CEO, and all key departments, including ad sales and distribution, will be headed by Zee officials. All this happened with promoter holding in ZEEL at just 4 per cent and clearly the ability to swing the company's board in his favour.  

One person privy to the discussions said Sony would have a larger proportion of the board, but the functioning of the merged entity would be left to Chandra. That was alright with Sony.

NP Singh, the current boss of Sony in India, has run a tight ship with tremendous financial discipline. The next step for him is likely to be the chairman of the merged entity. "Punit fits into the succession planning bit well and is boss today of a much larger entity. From a situation where Invesco wanted him out, he is back in the saddle and could well run a behemoth if the deal goes through," the person added.  

According to Mahesh Singhi, Managing Director, Singhi Advisors, the deal proposed now is one out of choice and not hostile (as it might have been earlier) and that should keep shareholders happy. "Punit is a capable leader with the required trust from the Zee executive team and has been instrumental in keeping it together in the midst of turmoil over the last 2-3 years," he says.

Also Read: Zee-Sony OTT platform: An ideal match, say experts