Both Sony and Zee have welcomed the conditional approval received from the Competition Commission of India (CCI) for the proposed merger between the two media groups.
The approval was given on Tuesday by the CCI, after it accepted the voluntary remedies proposed by the parties to allay possible anti-competitive concerns, sources close to the development said.
In its order pronounced on September 7, 2022, the National Company Law Tribunal (NCLT) had advised Zee to convene and conduct the meeting with its shareholders on October 14, 2022, to seek their approval for the proposed merger.
Combination C-2022/04/923— CCI (@CCI_India) October 4, 2022
Commission approves amalgamation of Zee Entertainment Enterprises Limited (ZEE) and Bangla Entertainment Private Limited (BEPL) with Culver Max Entertainment Private Limited (CME), with certain modifications.#CCIMergerControl #mergers #mergerupdate pic.twitter.com/5JFG6RgiHl
Welcoming the approval, Sony Pictures Networks India said, “We are delighted to receive CCI approvals to merge ZEEL into SPN. We will now await remaining regulatory approvals to finally launch the new merged company. The merged company will create extraordinary value for Indian consumers and eventually lead the consumer transition from traditional pay TV into the digital future.”
Karan Taurani, Senior Analyst at Elara Capital, said, “It is expected that the final CCI order is to be followed in the next three weeks, which will provide more details; shareholder meeting is to be held on October 14 for approval as mentioned earlier.”
The NCLT process may take 3-4 months and if all clearances come by, then the merged entity can be seen taking shape towards the end of the financial year of the start of FY25. However, they will also need the approval of the Ministry of Information and Broadcasting.
On the other hand, Zee Entertainment in its official statement, released on October 4, had said, “The CCI has granted the approval in Phase-1 after evaluating the official legal and economic submissions made by the Company.”
“Considering the immense value which the proposed merger will generate for all its stakeholders, the Company has offered the necessary remedies in accordance with the regulator’s guidelines.”
Though ZEE sees the approval from the CCI as another positive step in the overall merger approval process, the Composite Scheme of Arrangement remains subject to applicable regulatory and other approvals.
The proposed merger of ZEEL with Sony Pictures Network India (SPNI) was announced in September last year. The deal would help Sony to expand its media business in India as per sources. SPNI is an indirect wholly-owned subsidiary of Sony Group Corporation, Japan.
Deals beyond a certain threshold require the approval of the CCI.
Elara Capital’s Taurani said that since there is no major overlap for the companies, he doesn’t expect any large flagship channel to go off-air.
According to Zee’s latest statement, both parties have submitted a voluntary remedy to CCI, in terms of modifications for the merger terms - this is in line with their view that there is a very low likelihood for any large flagship channel to switch off due to no major overlap.
Taurani said, “The parties (Zee/Sony) may have offered to shut channels, wherein the viewership share put together would be high (over 40%), but overall revenue impact could have been minimal, as these channels may be basis a push demand (pushed to distributors and advertisers) and not pull demand by customers.”
“We maintain our positive stance on Zee, helped by synergies by merger; no large flagship channel switching off will not have any material impact on earnings,” added Taurani.