Form of words:
Mumbai: Subhash Chandra is no stranger to the corporate fight. In 1998, when his then-partner Rupert Murdoch attempted to buy out his thriving five-year-old Indian television venture, the entrepreneur deftly defended the billionaire and took back control of Zee Entertainment Enterprises Ltd.
More than two decades later, India’s largest publicly traded entertainment network is back at the center of a complicated boardroom dispute: Chandra and his supporters versus Atlanta-based Invesco Developing Markets Fund, the largest shareholder of Zee whose 18% stake.
This time, the 70-year-old tycoon, known for his distinctive black and silver hairstyle, is at risk of losing control given the prospects of Zee, with the advent of streaming. His family’s stake in Zee Entertainment has come down to less than 4% after he pledged shares to reduce the debt of his wider conglomerate Essel Group. While Chandra’s son is running Zee as CEO, the media mogul is looking for ways to increase his family’s stake.
Unhappy with the way Zee is operating, Invesco wants to oust Chandra’s son Puneet Goenka as CEO, overhaul the board and get a new owner. Zee shares have fallen 50% from their 2018 record.
At stake is a company that captures 17% of the Indian media and entertainment market, reached over 600 million people. Zee also has a vast library of vernacular content that dates back to the 1990s – an increasingly lucrative asset amid global streaming and cross-cultural hits Like the ‘squid game’ of South Korea. Zee’s own streaming platform is a leader among local players with approx. 73 million Monthly active users. Netflix Inc., Amazon.com Inc. And global giants like Disney are trying to gain a foothold in India, one of the world’s most promising pools of future audiences.
Paritosh Joshi, who runs a media consultancy, said, “Zee is a great business start-up for any lover in India or abroad.” provocateur advisory in Mumbai. “Rupert Murdoch saw value in Zee 30 years ago and made Subhash Chandra his business partner. And the business case remains as India currently has 200 million television homes compared to 50 million.”
Read also: Invesco is trying to take over Zee secretly, alleges founder Subhash Chandra
newfound appeal
India’s entertainment market to grow by almost 30% to $29 billion by 2023 Ernst & Young an estimate. It gives a new appeal to local players like Zee. The Walt Disney Company had little presence in India before it was overnight pole position with a 27% market share after inheriting Murdoch’s local Star channels from its 2019. takeover NS 21st Century Fox Inc.Entertainment property.
Also Zee’s stock is relatively cheap right now. Its market capitalization has grown to nearly $4 billion from its 2018 peak, fueled by debt raising at the group level and share pledges by the founders.
The bitter face-off between Chandra and Invesco includes a war of words, including accusations from the tycoon that the American fund has a “somewhat bigger design” to take over the empire they founded. Invesco has stuck to its demand for a shareholder meeting to remove Chandra’s son from the board and as CEO, saying the company’s founders were enriching themselves at the expense of common shareholders.
Zee has asked a Mumbai court to stop Invesco’s call for a shareholder meeting. The decision is due on Tuesday.
The dispute threatens to spark an acquisition war. After Invesco Attempt In March, after Reliance Industries Ltd. to facilitate the purchase of Zee – run by Asia’s richest man Mukesh Ambani – fell through, it sought Goenka’s removal.
Chandra protested announcement of 22 September that Zee has entered into friendly merger talks with Sony Group Corp, which has been looking for Indian assets for some time. The terms of the non-binding Sony deal, with a special 90-day period, allow the Chandra family to increase their stake to 20% – terms that are contrary to Invesco’s objectives. Zee has said merger with Sony is the best deal on the table, but it is open to offers from other bidders.
Reliance confirmed that discussions were held with Goenka in March on a “comprehensive proposal” to merge their media operations. The group said on October 13 that differences had arisen over the role of the founding family and the manner in which it could increase its stake. Reliance said it decided against going ahead, adding that “we have never resorted to any hostile transactions.”
Zee, Sony and Reliance declined to comment further.
Read also: How media mogul Subhash Chandra took over Zee by defeating an American activist fund
bumpy road
“For the merger, Zee would need 75% approval from its shareholders, which is a mountain in itself,” Nitin Mangal, an independent analyst who publishes on SmartKarma, said in a September 27 note. “It will be a bumpy road for Zee in the near future.”
If Sony and Zee agree on a final deal, it would be a coup for the Japanese giant. This will more than double Sony’s market share in India to about 25%. Its local streaming service called SonyLIV may also get a boost.
But it is too early to declare Sony the winner. Reliance could theoretically return to the race if Invesco manages to reform Zee’s board which then calls for fresh merger proposals. Ambani, whose technology and retail ventures gained $27 billion In investing, there are also entertainment and streaming ambitions.
“If Invesco is able to reconstitute the board, I believe the board will run the auction process and select the highest bidder,” said Mohit Saraf, New Delhi-based managing partner of law firm Saraf & Partners. “Whether it is with Sony or Reliance, it is all about consolidation and gain in market share.”
Read also: Sony India tied up to buy Zee Entertainment, will own 53% of the merged entity
rice exporter
Chandra has developed a knack for creative bargaining after his short stint rice exporter For the then Soviet Union in the 1980s. He diversified into packaging materials, set up an amusement park outside Mumbai, and launched Zee TV, introduced cable television to Indian homes in the early 1990s when India ended the state’s monopoly on media .
In the battle with Murdoch, Chandra had the upper hand. The venture was doing well partly because of the Hindi soap operas and Bollywood content Zee brought to the table. But this time, what Chandra has created and nurtured, fighting to save it from a position of relative vulnerability.
“I will fight not for financial gain, but for the satisfaction that I am honest with Zee’s millions of viewers,” Chandra told Zee News, his group’s news channel, in an interview earlier this month.—bloomberg
Read also: India’s IPO frenzy sees bankers trade work-life balance for a hefty fee
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