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Amid the ongoing boardroom battle, Zee Entertainment Enterprises Ltd on October 12 said an “offer” was presented to them by largest shareholder group – Invesco Developing Market Funds – back in February 2021 to merge the company with entities linked to a large Indian group.
“A deal was presented by Mr. Aroon Balani and Mr. Bhavtosh Vajpayee, representatives of Invesco, to (Zee MD and CEO) Mr. Punit Goenka in February 2021, involving the merger of the Company and certain entities owned by a large Indian group (Strategic Group),” Zee said in a regulatory filing.
The offer was turned down by Zee’s Managing Director and Chief Executive Officer Punit Goenka, “as the merging entities of the strategic group were over-valued”, the company claimed .
“As per the deal presented to Mr. Punit Goenka, upon completion of the aforesaid merger, the strategic group would have held a majority stake in the merged entity and Mr. Punit Goenka would have been appointed as the MD & CEO of the merged entity,” it said.
The information related to the merger deal, that was allegedly offered by Invesco, was shared by Goenka with the Board of Directors, the company said.
Also Read | Invesco shoots letter to Zee shareholders, seeks better governance, says founding family benefiting at the cost of others
The board met earlier in the day to deliberate upon the note which Goenka shared with them.
Goenka informed the board that Invesco had unilaterally “agreed” to the merger deal presented by the strategic group, whose name was not revealed in the regulatory filing.
“The company’s management team informed the board that in their considered view, the valuation attributed to the entities belonging to the strategic group could have been inflated by at least Rs 10,000 crores,” Zee said.
This would mean that if the proposed deal would have been approved, the shareholders of the company would have “suffered a loss of at least Rs 10,000 crores”, it added.
The company stressed that Invesco wanted Goenka to lead the merged entity. They “insisted that he would be paramount in leading the operations and business”, Zee said.
This assumes significance as Invesco, through a letter sent to the board on September 11, sought an extraordinary general meeting to push for the ouster of three directors including MD and CEO Goenka.
According to Zee, Invesco, on learning about Goenka’s opposition to the purported merger offer with the strategic group, had said that the “deal would be consummated with or without him”
“Invesco time and again reminded Mr. Goenka that if he were to refuse to progress the deal, he and his family would lose out,” the company claimed.
“The promoter group of the Company was being offered 3.99% shareholding of the Merged Entity i.e. no dilution in the existing stake of the promoter group of the Company, and Mr. Goenka was further offered employee stock options (ESOPs) (with no vesting conditions), representing approx. 4% of the shareholding of the Merged Entity,” Zee said.
Accordingly, the existing promoter group of the company along with Goenka would have held up to 7-8 percent in the merged entity, Zee claimed.
The company, in the above context, referred to the open letter sent by Invesco on October 11 in which it categorically noted that it would oppose any strategic deal that would disproportionally benefit the promoter family.
“Invesco’s stance in their Open Letter that they ‘will firmly oppose any strategic deal structure that unfairly rewards select shareholders, such as the promoter family, at the expense of ordinary shareholders’, runs contrary to the very deal Invesco was proposing itself a few months ago,” it said.
The company, apart from claiming that Invesco wanted Goenka to lead a merged entity back in February, also pointed out the shareholder had voted in favour of Goenka’s reappointment as the company’s MD and CEO “as recently as September 2020”.
The details about the purported merger offer have been shared by the Zee board at a time when the company is locked in a litigation against Invesco at multiple legal forums over the latter’s demand for an EGM to rejig the board and oust Goenka.
Additionally, Invesco has raised concerns earlier about the proposed merger between Zee Entertainment and Sony.
“As long-term investors and stewards of investor capital, the Invesco Developing Markets team takes its fiduciary duty very seriously and is committed to acting in the best interest of clients and shareholders,” Justin Leverenz, Chief Investment Officer, Invesco Developing Markets Equities, said on October 11.
Notably, the Zee board has rejected Invesco’s EGM demand citing the opinion received from “eminent legal experts including former Supreme Court judges”.
Invesco, which along with OFI Global China Funds owns nearly 18 percent stake in the company, has moved the National Company Law Tribunal to seek a legal order for the EGM. The matter is currently subjudice.
