Zee-Invesco tussle takes a new twist as Reliance enters the scene

The controversy surrounding Zee Entertainment Enterprises Ltd and minority investor Invesco has turned uglier, with the billionaire Mukesh Ambani-controlled Reliance Industries Ltd being dragged into the imbroglio. 

On Tuesday, Zee managing director and chief executive officer Punit Goenka said that Invesco was trying to oust him because he chose Sony India over a large Indian conglomerate for a merger with the broadcaster.

Goenka didn’t name the conglomerate. But Invesco, a US-based asset manager that is the biggest institutional shareholder in Zee Entertainment, claimed on Wednesday that the Indian company was Reliance, which owns media companies TV18 and Network18.

“We wish to make clear that the potential transaction proposed by Reliance (the ‘strategic group’ referenced but not disclosed in the October 12 communication by Zee) was negotiated by and between Reliance and Goenka and others associated with Zee’s promoter family,” Invesco said.

Invesco also said that, as ZEE’s single largest shareholder, its own role was to help facilitate that potential transaction “and nothing more”. Invesco added that it rejects all assertions made by Zee on Tuesday. 

“We specifically note that the implication that we as a shareholder would seek out a transaction for Zee that is dilutive to the long-term interests of ordinary shareholders, including ourselves, simply defies logic,” Invesco said.

Invesco, through its funds Invesco Developing Markets Fund and OFI China Global LLC, had previously called for a meeting of Zee shareholders to oust Goenka. After Zee refused to hold the meeting, the two shareholders approached the Bombay High Court and the National Company Law Tribunal. The cases are pending.

Previously, Zee founder and Goenka’s father, Subash Chandra, had questioned Invesco’s intentions behind seeking the removal of Goenka.

Zee-Sony deal contours

Last month, Zee had struck a deal with Sony India to merge the two companies. As part of the deal, Sony would get a majority stake in the combined company and would nominate a majority of the board of directors. However, Goenka would stay as MD and CEO for five years.

The merged entity will effectively own the biggest suite of entertainment content services in India, bypassing Disney India and Star India. It will also be bigger than Viacom 18, the joint venture of billionaire Mukesh Ambani’s Network 18 Group and US-based ViacomCBS.

Interestingly, Sony and Viacom18 were engaged in merger discussions but scrapped the talks last year as the Ambani-led group reportedly wanted a majority stake in the combined entity.

Stock market reaction

Meanwhile, the stock market reacted quite negatively to the latest comments and counter-comments, at least in so far as shares of the Reliance-owned media companies.

Shares of TV18 Broadcast Ltd took a tumble on Wednesday, going down by 5.7%. Shares of Network18 Media Investments Ltd slipped 5.5% after touching a one-year high earlier in the day. This, even as the parent company Reliance Industries Ltd was up more than 1.1% and the benchmark Nifty rose just under 1%. 

Shares of Zee Entertainment, too, rose on Wednesday and ended 3.6% higher at Rs 317.25 apiece.