Media and entertainment giant Zee entertainment Enterprises Ltd said in an interview that it has given official approval for its merger with Sony Pictures Network India. Post this announcement, the stocks of Zee entertainment limited rose nearly 20% on the 24th of September.
It has marked that Zee, has been experiencing constant pressure from the top investors in regards to management shuffle which also include the exit of the chief executive Punit Goenka from the board.
Zee further said that the company and Sony Pictures signed a non-binding term sheet into which they had to work together in multiple streams such as digital assets, production operations, linear networks, program libraries and more.
As part of the proposed deal, Sony Pictures Network India will hold a 52.93% stake in Zee entertainment while Zee shareholders will hold a 47.07% stake.
The total period of a term sheet is of 90 days during which both the companies will conduct mutual diligence and finalize definitive agreements, the filing said.
As a part of the merged entity, Punit Goenka will continue to be the managing director and CEO of the whole deal.
Let’s understand, what’s the merger means to Zee entertainment and its shareholders:
How Does the Deal Benefit Zee Entertainment?
Zee Entertainment is considered as one of the largest entertainment players in the industry with an outstanding market share including a strong pan-India presence. Apart from the Hindi entertainment segment, the company nailed its presence in regional languages as well.
Currently, the company operates 49 channels in 11 different languages which in turn help the company to generate an extra audience base in the country. Also, Zee has its own OTT app called Zee5, which attracts its young audience as well.
However, during the pandemic, many things have been restricted which also hits the company hard in terms of revenue and fresh content availability. However, the company again took a fresh start and now it has started growing again.
The promoter's stake sale has been addressed and the company has some plans to undertake investment in the upcoming years. At this time, Sony’s merger with the company would aid the growth of Zee entertainment in the upcoming year.
Now, the company is planning to increase its content offering on the OTT platform Zee5 app to receive worldwide attention from the audience. The increased consumption of the content on the OTT platforms will surely benefit Zee entertainment in many ways.
As per the sources, the company continues to increase its viewership base and is likely to see a rise in it due to its lowered annual subscription fee which is Rs. 499 per year.
Recently, Zee released 11 shows and movies on the Zee5 platform. With fresh investments, there are more such shows and movies are likely to be released in the upcoming months. This, in turn, improves its overall subscription revenue.
As per the source, the company is all set to release 30 new shows in September month that is going to be featured in Hindi, Marathi and Tamil languages.
Also, it has started thinking to expand its movie production business which has suffered a lot in this pandemic.
Although the company faced a huge loss during the pandemic; it keeps maintaining its audience through the OTT platform Zee5.
As Zee entertainment is one of the oldest and leading companies in the entertainment and media industry, it has a strong audience base. It leaves no stone unturned in retaining and mesmerizing its new audience base through the television channel. In addition to this, Zee also plans to expand the movie production business that assists the company to monetize from different business segments.
Financials
If we look at the revenue model of Zee entertainment, then we will get to know that the company gets 40-45% of its revenue from its subscription and the rest is generated from the advertisements.
In the June quarter FY22, the company achieved revenue growth of nearly 30% than the last year. This was only due to the low base effect of the June quarter last year. The main reason behind the 30 per cent recovery growth is the subscription and the advertising revenue which has helped the company a lot.
If you compare the revenue of the company to the previous quarter i.e. March, id had failed by 17% due to the lockdown restrictions due to the second wave of COVID 19.
How Does This Deal Impact on the Investors
As everything looks good with the Zee-Sony merger, it takes a while for it to start generating revenue. This is because the pandemic leaves a heavy impact on all of us. In such cases, going to a theatre would be a huge risk.
However, the company can achieve revenue growth with the help of advertisements and the OTT platform Zee5.
The company’s advertisement revenue will heavily depend on the corporates’ performance also. Hence, in the long run, the Zee-Sony merger will bring something positive for the company and the investors.
Let’s quickly review the highlights of the Zee-Sony Pictures Limited Deal
Highlights
Sony Pictures will hold a majority stake in the Zee-Sony merger, where Zee holds 47.07% and the remaining stakes 52.93% to be held by Sony Pictures shareholders.
The board of directors will be nominated by Sony Pictures.
This merger is going to be a publicly listed company in India.
As per the non-binding term sheet, the promoters of the Zee-Sony group are free to raise their shareholders from 4% to 20%.
The final transaction would be subject to completion of customary due diligence and execution of definitive agreements and required third party approval, regulatory and corporates, including the votes of Zee’s shareholders.
Takeaway
Zee-Sony merger would take a drastic turn in investors lives. As the deal is closed, the shares of Zee entertainment ltd have increased to a greater extent. This will improve investors’ portfolios. The merger also leaves a heavy impact on retail investors as they can benefit a lot from Zee entertainment shares.
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