Why Zee Entertainment Shares Are Gaining Today

Shares of Zee Entertainment started on a positive note on Thursday after the company refuted reports suggesting potential risks to its planned merger with Sony Group Corp's India unit.

What Happened: Zee labelled reports that the merger was likely to fall apart in the eleventh hour as “factually incorrect” and affirmed its commitment to successfully closing the proposed merger as per the approved composite scheme of arrangement by the National Company Law Tribunal, Mumbai Bench.

In a regulatory filing, Zee Entertainment clarified that it is actively working towards finalising the merger, though it did not provide specific timelines. The response came in the wake of media reports indicating a risk of collapse for the proposed merger, citing challenges in reaching an agreement on leadership for the merged entity.

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Why It Matters: The merger deal, announced almost two years ago in December 2021, has received nearly all regulatory approvals. If successful, the merger would consolidate 75 channels, two video-streaming services and two film studios into a single entity.

Zee Entertainment has already incurred expenses of ₹176.2 crore for the proposed merger with Culver Max Entertainment (Sony Pictures Networks India), with merger-related costs amounting to around ₹7.3 crore in FY23, according to regulatory filings.

In December 2022, a definitive agreement for the merger was signed, designating ZEEL’s CEO Punit Goenka as the managing director and CEO of the combined company. However, concerns about the merger’s future emerged following the Securities and Exchange Board of India’s actions against Essel Group chairman Subhash Chandra and Goenka for alleged fund misappropriation from ZEEL.

Despite challenges, the proposed merger has secured approval from Zee’s shareholders and regulatory bodies, including the Competition Commission of India (CCI). As per the 2021 agreement, Sony would hold a 50.86% stake in the merged entity, with the Goenka family holding 3.99%, and the remaining stake with public shareholders.

Price Action: Zee Entertainment’s share price was up 0.42% at ₹250.75 near the start of trade on Thursday. The stock had lost 2.66% following the reports.

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