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Reliance negotiated for ZEEL merger deal: Invesco

Invesco says its role ‘was to help facilitate that potential transaction’

Written by George Mathew | Mumbai |
October 13, 2021 12:03:55 pm
Zee Entertainment Enterprises Ltd (ZEEL) (File Photo)

Invesco Developing Markets Fund on Wednesday revealed that the Reliance group negotiated with Zee group promoter family and Punit Goenka, MD and CEO of Zee Entertainment Enterprises Ltd (ZEEL) for a takeover or merger deal for ZEEL and admitted that its role “was to help facilitate that potential transaction and nothing more”.

“We wish to make clear that the potential transaction proposed by Reliance — the “strategic group” referenced by ZEEL but not disclosed in its October 12, 2021 communication — was negotiated by and between Reliance group and Goenka and others associated with Zee’s promoter family,” Invesco said.

“The role of Invesco, as Zee’s single largest shareholder, was to help facilitate that potential transaction and nothing more,” it said.

ZEEL on Tuesday said that Invesco pushed for the merger of ZEEL with a large Indian group (strategic group) as early as February this year. However, Punit Goenka said he rejected the deal citing “governance concerns”.

“We reject in full the assertions made by Zee in its release on October 12, 2021. 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 in a statement on Wednesday.

Invesco claimed that it “made various sincere efforts over the last two years to bring Zee back to good health”. “Discussions around strategic alignments have been just one part of this effort. Zee’s October 12 disclosure is yet another tactic to delay an EGM that will give shareholders their right under Indian law to vote for a slate of independent trustees and pave the way for a healthier future for Zee,” Invesco said.

“The recent interest of Sony, as well as the previous interest of Reliance, should be a reminder to all Zee shareholders of the enormous value that lies in this company, much in contrast to its dismal performance under the current leadership and Board over the last few years,” Invesco said. Invesco had last month sought an EGM for the removal of Goenka and appoint six directors as the deal with the Reliance group apparently failed to materialise. However, the ZEEL board then proposed a merger deal with Sony to counter the Invesco move.

On Tuesday, Goenka had gone on record saying that the valuation attributed to the entities belonging to the strategic group (Reliance group) was inflated by at least Rs 10,000 crore.

As per the deal presented to Punit Goenka, after completion of the merger, the strategic group would have held a majority stake in the merged entity and Goenka would have been appointed as the MD&CEO of the merged entity. “Punit Goenka expressed his apprehension to Invesco that as the merging entities of the strategic group were overvalued, it would result in a loss to the stakeholders of the company,” the company had said in an exchange filing.

ZEEL had said a deal was presented by Aroon Balani and Bhavtosh Vajpayee, representatives of Invesco, to Punit Goenka in February 2021, involving the merger of the company and certain entities owned by the strategic group. “Balani and Vajpayee maintained that I should have no objections to the deal for the following reasons: no dilution for the promoter group as the promoter group would get additional shares to retain its existing 3.99 per cent even in the merged entity and additional 4 per cent stake would be issued through ESOPs in the merged entity,” Goenka said in a note to the ZEEL board.

“This would result in total promoter shareholding of 7 -8 per cent at no cost to promoter group or me and I would continue to run the business as the MD and CEO of the merged entity,” he said.

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