Shareholder activism pushed Zee into a merger, says proxy advisory firm InGovern which alleged governance issues

Proxy advisory firm InGovern Research, which had red-flagged the issue of corporate governance at Zee, has said that Invesco may cancel their EGM call after an announcement about Zee’s proposed merger with Sony Pictures Networks India. However, the research firm in a series of Tweets has also said, that Invesco has no other option but to support the merger as it has no backup plan.

On September 11, the proxy advisory firm along with Institutional Investor Advisory Services (IiAS) questioned the corporate governance practices in the company. According to the proxy advisory firms, the audit and remuneration committees, of which Zee’s directors Manish Chokhani and Ashok Kurien were members, had approved a 46% rise in MD & CEO Punit Goenka’s pay for FY21.

On September 13, Invesco Developing Markets Fund (formerly Invesco Oppenheimer Developing Markets Fund) along with OFI Global China Fund LLC had called for an Extraordinary General Meeting of the shareholders of the company to remove MD & CEO Punit Goenka as Director of the company among other listed items.

Invesco and OFI hold 7,43,18,476 equity shares and 9,73,50,000 equity shares, respectively. The two shareholders represent an aggregate of 17.88% of the paid-up share capital of the Company.

“Sony comes in as a white knight for ZEE. Nothing wrong in 2 companies proposing a merger as CEOs can initiate merger discussions and then approach shareholders for vote. Invesco did not have alternate plan and hence, it would be surprising if it is not supportive of this merger (sic),” InGovern said.

In its tweets, explaining the matter, InGovern stated Invesco would be interested in financial returns and clean governance and with Sony as a majority shareholder, and a likely reconstituted board, the merged entity would be the best solution Invesco could have hoped for.

However, they also stated that Invesco might call off their EGM demands where it called for an oust Punit Goenka as the director of the company earlier this month. The merger with Sony has now ensured that Goenka remains the MD & CEO.

InGovern further explained that Invesco was unhappy about the governance of Zee due to the group company issues and Goenka’s capabilities as an MD of a leading media company was never questioned.

“So, probably for the first time in India, we are seeing activism where a fund triggered an action which is pushing the company into a merger. Shareholder Activism in Corporate India has come of age (sic),” said InGovern.

Sony comes in as a white knight for ZEE. Nothing wrong in 2 companies proposing a merger as CEOs can initiate merger discussions and then approach shareholders for vote.

Invesco did not have alternate plan and hence, it would be surprising if it is not supportive of this merger.

— InGovern Research (@InGovern) September 22, 2021

SPNI (Sony Pictures Networks India) and ZEEL earlier today announced that they have entered into an exclusive, non-binding Term Sheet to combine both companies’ linear networks, digital assets, production operations and program libraries.  Sony Pictures Entertainment will hold a 52.93% majority stake in the merged entity.

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