Mumbai: The ability of the Zee – Sony combined entity which will become a dominant media player in Indian Subcontinent with a fresh capital infusion of INR113b (USD1.6b) by Sony, has received a positive response from the market with leading financial institutions like Motilal Oswal and Emkay Global upgrade ZEE to Buy from Neutral with a revised Target Price ranging from INR425 to 430.
According to the Company Update issued by leading Financial Service players, The deal has paved way for fund infusion from SPNI and ZEE’s promoters. Post deal closing, SPNI will have a cash balance of USD1.5bn, including USD1.06bn through a rights issue by the current SPNI shareholders and a fund infusion from ZEEL promoters while SPNI will infuse INR90.5b in the combined entity.
While SPNI has 26 channels with strong presence in sports and ZEE operates 49 channels with leadership in General Entertainment and Movie genre in Hindi Belt and Regional Television Space, the combined entity will be a leader in the broadcasting space with a wider portfolio across genres, including general entertainment, movies, and sports. The merged company over time could use its leverage to boost its competitive position and synergies.
The report also states that the deal has addresses past corporate governance and Balance Sheet issues and a strategic partner like Sony will have the ability to leverage large scale opportunities in the Indian Media space.
The deal allows the promoter of ZEE to improve their shareholding and address corporate governance concerns while extending a strong partnership for Sony to invest in new opportunities in the changing Media landscape. The merged entity will also get a strong board, along with senior management headed by MD and CEO Punit Goenka who has a very strong operational background.
Moreover, the majority of the board of directors of the combined company will be nominated by Sony and will include SPNI’s current Managing Director and CEO, N.P. Singh. On closure of the deal, Singh will assume the role of Chairman, Sony Pictures India.
The report highlighted the fact that there is a possible upside from the merged entity’s higher competitive position in the market and synergy gains, given that both the companies have a significant potential to improve profitability while the benefits from the merger is likely to start reflecting from FY24.