Zee’s merger plan serves only the promoters: Invesco

In an open letter to all Zee shareholders, Invesco on Monday said the proposed Sony-Zee merger plan serves the self interest of the current promoters and dilutes other shareholders’ interest.

The American investment firm questioned why Subhash Chandra-led promoter group of Zee will continue to hold 4 per cent stake in the merged entity with the facility to raise it to 20 per cent even as other shareholders in Zee, including Invesco, will see their stake shrinking in the proposed merged entity.

“This non-binding agreement gifts a 2 per cent equity stake to the promoters of Zee in the guise of a “non-compete,” even though the current MD and CEO of Zee will continue to run the proposed merged entity for the next five years. This is dilutive to all other shareholders, which we consider unfair,” Invesco said in the letter signed by Justin M. Leverenz, Chief Investment Officer, Invesco Developing Markets Equities.

Invesco said that the non-binding deal with Sony appears to be no more than camouflage on the part of Zee to divert and distract from the primary issues before the company.

Corporate misgovernance
According to the letter, repeated acts of corporate misgovernance at the hands of the promoters and the Zee board of directors have demonstrably destroyed shareholder value. Invesco cited examples of a 40 per cent stock price increase in response to Invesco’s requisition for an extraordinary general meeting for Goenka’s removal. Invesco also brought up the regulatory rebuke by the June 17, 2021 report of SEBI, which concluded… “actions of the Company are not in the best interest of shareholders.”

For the past two years, Invesco said, it has been in conversations with Zee’s management to support and revitalise the situation at the company.

“This prolonged and regular engagement has yielded nothing other than platitudes such as “Zee 4.0.”

Invesco said that its initiative is driven by “our belief that the promoter family of Zee, with the support of its current board of directors, continues to evade accountability to its ordinary shareholders, who own 96 per cent of Zee’s equity.”

“We will firmly oppose any strategic deal structure that unfairly rewards select shareholders, such as the promoter family, at the expense of ordinary shareholders. In all potential alignments, we expect appropriate disclosures regarding the future leadership and governance of the company.” Invesco said. The Hindu BusinessLine