Revision as of 16:59, 10 February 2019

Briefly

Zee promoters eye convergence, ready to sell half their 42% stake, November 14, 2018: The Times of India

Zee Entertainment, as in Nov 2018
From: Zee promoters eye convergence, ready to sell half their 42% stake, November 14, 2018: The Times of India

Zee Entertainment shareholding
From: Zee promoters eye convergence, ready to sell half their 42% stake, November 14, 2018: The Times of India

Could Attract Reliance, Global Media-Tech Cos

Months after Disney closed a deal to acquire Rupert Murdoch-controlled 21st Century Fox’s major global assets — including Star India — for over $71 billion, the promoters of Zee Entertainment on Monday unveiled a share sale plan that could lead to a blockbuster merger and acquisition deal in the Indian media industry.

Zee said that “Subhash Chandra and family along with its advisors met in Mumbai over the Diwali weekend” and decided to offload up to half of its promoter holding of about 42% in flagship Zee Entertainment Enterprises Ltd (ZEEL), as part of a “strategic review of its businesses in the changing global media landscape”.

Storied investment banker Goldman Sachs has been appointed to scout for suitors. The outcome of the strategic review is expected to be concluded by March-April 2019.

Among the names that are already doing the rounds as potential buyers are Mukesh Ambani’s Reliance Industries, which is on the hunt for content to feed Jio, US cable giant Comcast, Alibaba, Apple and Google.

While Zee’s communication to the stock exchanges said it was seeking a “partner” for up to 50% of promoter holdings, investment bankers and media insiders believe it might be persuaded to sell its entire stake. “If you want a global player or even Reliance, they’ll want control if they’re going to pay a strategic premium,” said one of them.

By his reckoning, Zee could command a 30% premium over its current market valuation of about Rs 42,000 crore, or about Rs 55,000 crore. The promoter stake of 41.6% (as of September 30) – of which 59% is pledged – would then be worth about Rs 23,000 crore.

“The company has been doing well in its domestic business but given our global ambitions, we are looking for a partner with expertise in technology,” Chandra’s son Punit Goenka, ZEEL’s managing director & CEO, told TOI. “Gone is the time when we could do it on our own. From a content company, we want to become a content and technology company.”

Zee’s consolidated revenues were Rs 7,126 crore in 2017-18 and profit after tax was Rs 1,478 crore.

Asked if the promoters would be willing to sell their entire stake given the right valuation, Goenka said no. But, he added, the company would be open to multi-level deals that could see the new partner pick up higher stakes in subsidiaries, for instance, Zee5.

Chandra may be emulating Murdoch

Brushing aside threats to traditional broadcasting businesses from new-age over-the-top (OTT) players, including Amazon Prime Video and Netflix, ZEEL’s managing director & CEO Punit Goenka said he expected Zee’s portfolio play to change dramatically in the next five years.

Murdoch’s Indian general entertainment and OTT platform Hotstar were said to be key to Disney’s takeover interest — and while there was no geography-wise break-up of valuations, a few media observers placed Star India’s as high as $10-15 billion. In fact, analysts said Chandra, who wants to retain control over Zee’s news broadcasting assets, could be emulating Murdoch. “The Zee Entertainment stock hasn’t done well recently. But the fundamental value is higher. The promoters want to realise that value,” said an analyst.

“There is informed recognition that the world is convergent today and the lines across media, telecom, manufacturing and technology are thinner than ever. The review showed that the family needs to accelerate efforts to stay ahead of fastchanging trends,” Zee said.

“Zee is likely to elicit high interest from global players and valuations are likely to reflect the inherent scarcity premium since there isn't any comparable asset left in the Indian media space after this,” said Sanjay Jain of Taj Capital, a New Delhi-based investment advisory firm. “With the transformational changes happening in media globally with OTT platforms, Zee offers a serious content platform including films and studio strengths, which can be built upon to shape it for evolving technologies in the internet space,” he added.

Zee Network has assets in Hindi and a swathe of vernacular markets, giving it a national footprint. The OTT business under Zee5 has become the largest after Hotstar. Advertising revenues (63%) and subscription revenues (30%) contributed a major chunk of topline, according to company officials. Essel, which is promoted by Chandra and which has a stake in Zee, also has distribution assets in Dish TV and Siticable.

YEAR-WISE PERFORMANCE

2018: a bad year

In reprieve for Zee, lenders agree not to use ‘default’ tag, January 28, 2019: The Times of India

Performance of Zee Group stocks on the BSE ( in %), and till 25 Jan 2019
From: In reprieve for Zee, lenders agree not to use ‘default’ tag, January 28, 2019: The Times of India

Meeting Held Over Weekend After Stocks Crashed

Zee and Essel Group chairman Subhash Chandra has reached an agreement with lenders, under which the latter wouldn’t declare an event of default due to the steep fall in share prices. This follows last Friday’s stock market rout of Zee and Essel Group stocks, in which investors lost $2 billion, or around Rs 14,000 crore. A prolonged meeting between the lenders and the promoters took place over the weekend after the steep fall in the shares of Zee Entertainment Enterprises and Dish TV triggered a panic.

Some of the lenders, who have a pledge on the promoter family stock, had sold about 6.5 million shares in the Friday carnage. This prompted Chandra to issue an unprecedented open letter, apologising to the lenders and seeking their patience. On Sunday evening, Essel said the lenders have agreed not to trigger “any event of default declared due to the steep fall in price”. “As a result, there will be synergy and cooperation among lenders, leading to a unified approach,” the statement added.

Lenders drew comfort from reiteration by the promoters for a speedy resolution through a strategic sale in a time-bound manner, the statement said. “We have always believed in the intrinsic value of Zee Entertainment and, most above, the sheer value system with which its promoters function,” Aditya Birla Sun Life AMC’s CEO A Balasubramanian said.

Speaking on the development, Chandra said, “I am pleased to share that we have achieved an understanding with lenders. We have always valued their immense trust and faith. I am very positive, that we will continue to take such positive steps in rising up from the current challenging times, with support of all stakeholders.”

Zee Entertainment further reiterated that Nityank Infrapower & Multiventures, which was being investigated for money laundering during the postdemonetisation weeks, was an independent company and did not belong to Zee Group.

It also said that queries from the Serious Fraud Investigation Office (SFIO) were directed to Nityank Infra. “Information and documents relating to certain transactions were sought by SFIO from certain group entities and these were provided,” Zee Entertainment said in a letter to the exchanges. “In view of the above, since all information sought by SFIO has been provided and no further information has been subsequently sought, the matter stands closed for the group entities.”