Zee down 6% on likely setback in merger with Sony

Zee’s shares witnessed a 6 percent drop on May 12 as the proposed merger with Sony hit yet another obstacle.

Reports indicate that the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) notified the Mumbai bench of the National Company Law Tribunal (NCLT) that the Securities and Exchange Board of India (SEBI) had instructed them to inform the tribunal of a recent order issued against Shirpur Gold Refinery, an Essel Group company.

The NCLT is presently hearing the merger case of Zee and Sony.

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In April, SEBI issued an interim order against SGRL, its former chairman Amit Goenka, promoter Jayneer Infrapower and Multiventures, and five others for allegedly diverting funds from the company and breaching other regulations. Shirpur is a subsidiary of the Essel Group led by Subhash Chandra Goenka, and its creditors have brought it to the NCLT under the Insolvency and Bankruptcy Code. Until 2021-22, Amit Goenka served as non-executive chairman and director of Shirpur.

The proposed merger has already been grappling with legal challenges due to opposition from several creditors, including Axis Finance and JC Flower ARC, among others. These lenders have requested that the NCLT direct Zee’s promoters to repay using the funds they are expected to receive as a non-compete fee from Sony.

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The NCLT bench, headed by Justice H.V. Subba Rao and comprising member Madhu Sinha, suggested that both the BSE and NSE should take into account the order since they had cleared the merger. The merger of Zee-Sony, expected to be one of the largest mergers in the Indian media entertainment space, has been cleared by both the exchanges and the Competition Commission of India. However, the merger is still subject to necessary regulatory, shareholder, and third-party approvals.

After hearing both parties, the tribunal has postponed the matter for further hearing on June 16.
The market cap of Zee has declined 29 percent in the last six months and over 13 percent in the last month. At 10.45 am, the scrip was trading 4.55 percent down on the NSE at Rs 183.35 with benchmark Nifty Media trading 1.35 percent down at 1,697.60 points.