Investors call for regulatory action as Zee-Sony merger hits roadblock

A clutch of institutional investors, including Life Insurance Corp. of India, owning more than 23.5 per cent of Zee Entertainment Enterprises Ltd, has written to the markets regulator that the current stalemate in the company’s merger talks with Sony group is hurting minority shareholders, people aware of the matter said.

The investors, which also include ICICI Prudential, Amansa Holdings, Nippon India, and Plutus Group, are also readying an alternative merger plan for the consideration of the Sony board if ZEEL managing director and chief executive Punit Goenka declines to step down before the deadline to complete the merger with Sony ends, the people said, requesting anonymity.

“The funds plan to call for an extraordinary general meeting (EGM) to seek the removal of Goenka and some other directors,” one of the people aware of the matter said.

The investors are expected to notify exchanges about their intention to effect a leadership change in ZEEL, according to the people cited above. ZEEL promoters, represented by Punit Goenka, own about 4 per cent of the company.

In an emailed response to a query, a Zee spokesperson said, “The company does not comment on speculations or rumours,” a Zee Spokesperson told Moneycontrol in an emailed response.

The Securities and Exchange Board of India (SEBI), along with the spokespeople for LIC, ICICI Prudential, Amansa Holdings, Nippon India, and Plutus Group, did not immediately respond to requests for comment.

Under Indian laws, shareholders with at least 10 per cent ownership have the right to call an EGM, and the board must convene the meeting within 21 days from the date of receiving a valid requisition. If a majority of shareholders approve the resolution, the board is obligated to act.

The share price of ZEEL fell 7 per cent to Rs 231 on January 20.

Although the merger was initially to be completed by December 21, 2023, Zee requested an extension, and Sony agreed. Accordingly, 30 days after the December 21 deadline was included in the merger pact signed in 2021 if either party sought more time.

ZEEL also sought more time to resolve the issue of whether Goenka would helm the combined entity, a clause that is part of the signed merger deal. While Sony initially agreed to have Goenka as the leader of the merged entity, it reversed its stance after a regulatory probe against him.

In June last year, SEBI alleged that Zee engaged in deceptive practices by falsely claiming the recovery of loans to hide private financing deals linked to Zee Chairman Subhash Chandra. In an interim order, the regulator stated that Chandra and his son Goenka misused their positions and diverted funds. As a result, Goenka was prohibited from holding executive or director positions in listed companies.

Goenka was, however, reinstated as the managing director of ZEEL on October 30 after the Securities Appellate Tribunal overturned the ban imposed by Sebi.

In a separate case, close to 71 per cent of Dish TV’s shareholders rejected the appointment of four independent directors over corporate governance concerns at the EGM held on December 22. Dish TV is also controlled by the Goenka family. Tensions between promoters and public shareholders, led by special situations investor JC Flowers, have intensified. The investor flagged several corporate governance lapses, including Dish TV’s decision to write off around Rs 203 crore investment in its streaming app Watcho in June last year. MoneyControl