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Monday, December 06, 2021

Bombay HC asks ZEEL to hold EGM as proposed by Invesco

Any resolution passed to be put on hold until HC decides on legality of Invesco request.

By: ENS Economic Bureau | Mumbai |
October 22, 2021 1:27:16 am

The Bombay High Court on Thursday asked Zee Entertainment Enterprises (ZEEL) to call an extraordinary general meeting (EGM) as demanded by Invesco Developing Markets Fund, the largest shareholder of ZEEL.

The court has proposed that a neutral chairperson should head the shareholders’ meeting. Any resolution passed at the extraordinary general meeting will be put on hold until the HC decides on the legality of the Invesco’s request for such a meeting.

Invesco had last month sought an EGM for the removal of ZEEL managing director and chief executive Punit Goenka and appoint six directors. Invesco had pushed for a merger deal with the Reliance group in February this year, which apparently failed to materialise. However, the ZEEL board then proposed a merger deal with Sony to counter the Invesco move.

The promoter group — Subhash Chandra family — holds an only four per cent stake in ZEEL. “Since the EGM demand, Zee’s management and board have gone to great lengths to deny a basic shareholder right enshrined in Indian law,” Invesco said in a letter. “I acknowledge the stance that has been taken by Invesco, but communications pertaining to such proposals are always well-documented, and they speak to the contrary,” Goenka had earlier said. Hinting that he will take legal recourse, he said, “I too have a lot of points to put across, but I firmly believe that there is a right time and place for it. Our lawyers will do the needful in the court of law, as deemed necessary.”

Meanwhile, ZEEL has commenced the due diligence process for its proposed merger with Sony Pictures Networks India (SPNI), a subsidiary of Japan’s Sony Corp, following a non-binding agreement signed in September.

Explained

Invesco’s demands

Invesco had last month sought an EGM for the removal of ZEEL managing director and chief executive Punit Goenka and appoint six directors.

The process of due diligence has started and is in full swing now, as the companies have to close it within the stipulated 90-day time frame. This is actually a “tight schedule”, considering both the companies have a large presence across metros and large cities, sources said.

ZEEL and Sony had signed a non-binding term sheet to combine the companies’ linear networks, digital assets, production operations and programme libraries. As part of the deal, SPNI will also infuse about $1.58 billion in the merged entity, which could be used to pursue other growth opportunities. The merged firm will be a publicly-listed company, with Goenka continuing as MD and CEO for five years.

Invesco had earlier said weak governance and a permissive board have enabled Zee’s growing entanglement with the financial distress of the founding family. “This has brought extraordinary reputational damage and regulatory rebuke to Zee. Recent actions of Zee’s leadership and the board further confirm a deep apathy to shareholder rights,” it said.

ZEEL shares closed 0.36 per cent higher at Rs 321.40 on the BSE on Thursday.

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