Zee-Sony deal likely to go through without Punit Goenka as CEO: Elara Capital

With a Bloomberg report casting doubts on the Sony-Zee merger on Monday, Elara Capital’s analyst Karan Taurani asserted that the deal would go through without Punit Goenka as the CEO of the merged entity.

According to the report, Sony is expected to call off the USD 10bn merger with Zee due to a standoff over whether Zee’s CEO Punit Goenka would lead the merged entity.

“Sony plans to file the termination notice before a Jan 20, 2024, extended deadline for closing the deal, saying some of the conditions necessary for the merger had not been met. However, Discussions are still ongoing between the two sides and a resolution can still emerge before the deadline,” the report said.

Responding to the report, Taurani said that deal conversations are on and will most likely go ahead without Mr Punit Goenka as CEO.

“We expect a final clarity on the extension of the deal by the third week of January 2024,” he said.

Taurani added, “We continue to believe that the deal is equally important for both entities with competitive intensity growing due to Disney/RIL talks gaining traction.”

There is a very small chance of Mr Goenka putting the deal at risk due to his desire to become CEO, even if the term sheet and deal condition are mentioned, Taurani said.

Taurani explained that Zee has moved up 50% over the last year, despite a muted financial performance, largely on the back of valuation multiple re-rating due to the merger with Sony Corp. Any potential risk of the merger getting called off by Sony will have a significant negative impact on valuations of Zee.

Talking about how the deal will go ahead in case Goenka concedes defeat, Taurani said that approvals from shareholders, the Board, ROC (Registrar of Companies) and MIB (Ministry of Information and Broadcasting) would be needed after the change in deal terms for a new CEO, which may only take a few weeks.

Taurani asserted that a fresh NCLT/CCI approval will not be needed for a change in CEO of the merged company.

“The NCLT/CCI approval isn’t time-bound, which means any potential extension has no negative impact on the merger,”

On Friday, former CJI UU Lalit argued Punit Goenka’s appointment forms a part of the basic structure of the deal approved by Zee’s shareholders and any variance will require fresh approvals from stakeholders and regulators.

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