Zee Entertainment Enterprises Ltd (ZEEL) said Invesco, its single largest shareholder, had itself come with a proposal in February this year for a merger of the company with certain entities owned by a large Indian group (Strategic Group) with inflated valuation "by at least Rs 10,000 crore".
In the continuing battle between the promoter family and Invesco, ZEEL said its Managing Director and CEO Punit Goenka has informed its board about a proposal made by Invesco about the merger, under which Strategic Group would hold majority stake but he was offered to be appointed as MD and CEO of the merged entity besides offering 4 per cent stake.
In a regulatory filing, ZEEL alleged that Invesco's stance in their open letter that they "will firmly oppose any strategic deal structure that unfairly rewards select shareholders, such as the promoter family, at the expense of ordinary shareholders" runs contrary to the very deal Invesco was proposing itself a few months ago.
"Accordingly, public securities markets have been misinformed by Invesco," it said.
Comments from Invesco could not be immediately obtained.
Without naming the group, Zee Entertainment said a deal was presented by representatives of Invesco, to Goenka in February 2021, involving the merger of the company and certain entities owned by a large Indian group (Strategic Group).
"As per the deal presented to Goenka, upon completion of the aforesaid merger, the Strategic Group would have held a majority stake in the merged entity (the Merged Entity) and Punit Goenka would have been appointed as the MD and CEO of the merged entity,” said ZEEL.
Moreover, the promoter group Subhash Chandra family was offered 3.99 per cent shareholding of the merged entity, with no dilution in the existing stake.
In addition to that, Goenka was further offered employee stock options (ESOPs) with no vesting conditions), representing approximately 4 per cent of the shareholding of the Merged Entity.
"Accordingly, the existing promoter group of the company along with Goenka would have held up to 7-8 per cent in the merged entity," said ZEEL.
While sharing the details of Invesco’s proposal, the board said the deal was first presented to Goenka over a call scheduled on February 23, 2021, Aroon Balani and Bhavtosh Vajpayee.
As per the terms and conditions, on completion of the merger, the strategic group would hold a majority stake of the merged entity.
"The shares of the company were valued at Rs 220 per share, with a total valuation of the public shareholding of the company as Rs 21,129 crore; the value of entities owned by the strategic group was considered at Rs 17,500 crore,” it said.
Moreover, "the Strategic Group would infuse approximately Rs 14,000 crore of cash into the merged entity, under which the shareholding of the Strategic Group in the merged entity would increase to approx 60 per cent.”
"I was to continue as the MD and CEO of the merged entity," said Goenka in the note to the board of ZEEL.
According to Goenka, he expressed surprise at the deal being communicated to him by a public shareholder of the company, without any prior involvement of the management or the board of the company.
According to ZEEL, this is contrary to the claims made by Invesco, which had on Monday in an open letter opposed the scheme of merger of the company with Sony Picture Network and had said that allotment of additional 2 per cent equity of the merged entity to the founding family via a non-compete that seems entirely unjustified.
The board of ZEEL in its meeting held on Tuesday has again demonstrated their continued faith in Goenka's leadership and the board's handling of the various governance related matters.
(With inputs from PTI)