Invesco drops EGM requisition, move to quicken ZEEL-Sony merger

A day after the Bombay High Court has allowed Invesco’s appeal against Zee Injunction which restricts Invesco from calling a shareholder meeting to remove Zee’s Managing Director & Chief Executive Punit Goenka, Invesco has decided to withdraw its EGM requisition notice.

Invesco who owns a majority stake in Zee Entertainment Enterprises Ltd (ZEEL) in a statement said that they continue to believe that the ZEE-Sony merger deal in its current form has great potential for Zee shareholders.

It further added that, following the merger, the board of the newly combined company will be reconstituted, which will achieve the objective of strengthening board oversight of the company.

“Given these developments, and our desire to facilitate the transaction, we have decided not to pursue the EGM as per our requisition dated September 11, 2021,” the company statement read. 

With Invesco softening their stance, the ZEEL-Sony Merger is expected to go through smoothly.

According to Elara Capital, the ZEEL-Sony merger could boost growth versus industry average as Sony-ZEEL together command ~22% of the ad revenue market.

“We estimate FY22E-24E ad revenue CAGR of 13%, on 1) low FY22 base (slight Covid impact) and 2) growth a tad above industry average, on TV synergies – Both offer a wide content variety across genres. On subscription revenues, we believe, the negative impact of NTO 2.0 will be relatively subdued for ZEEL-Sony as an entity as they can efficiently bundle their best channels, thus enjoying an edge over the competition. Also, Star and ZEEL-Sony may become irreplaceable given their sheer sizes (~45% ad market share) and may gain market share, medium-to- long term,” read a statement from Elara Capital 

ZEEL-Sony together may enjoy multiple advantages on the cost front. Both the entities commanded a 23-26 percent EBITDA margin as of FY21. They expected the margin to improve by 230 bps in the next two years to 26 percent in FY24.