ZEEL’s market value soars 15% on settling merger dispute with Sony

ZEEL’s share price surged by 14.7 %, closing at Rs 150.9 per share on Tuesday, following the announcement of an amicable settlement in its merger dispute with Sony. The two companies had been at odds for eight months since Sony called off the merger.

The share prices of the Punit Goenka-led Zee Entertainment Enterprises Ltd (ZEEL) saw dramatic swings during the two-year long merger process and plummeted significantly after the merger was terminated by Culver Max Entertainment Pvt Ltd (Sony) in January this year.

This volatility underscores the market's sensitivity to the evolving developments between the two companies.

ZEEL's share price opened at Rs 135 on Tuesday and went as high as Rs 154.9 before it closed at Rs 150.9 per share after the announcement about the settlement of the dispute.

At the time of termination of the merger, the market capitalisation of ZEEL stood at Rs 222.69 billion with per share price at Rs 231 as on January 20, 2024.

As of August 27, 2024, the company's market capitalisation stood at Rs 144.7 billion.

According to Karan Taurani, Senior VP, Elara Capital, the share price is likely to go even higher, upto Rs 210 per share in the third quarter of the current financial year.

“We continue to maintain our positive stance on ZEEL, as we expect better growth rates in the festive season (Q3FY25), led by higher ad spends within FMCG verticals; further profitability too will continue to improve helped by cost cutting initiatives, improved efficiencies, lower losses in ZEE5, which will drive valuation re-rating. We have a Buy rating on ZEEL with TP of Rs 210,” he said.

The joint statement issued by ZEEL and Sony announced the settlement of the dispute. It said that they have reached a comprehensive settlement to conclude all disputes related to the Merger Co-operation Agreement and Scheme of Arrangement.

"As part of the settlement, the companies have mutually agreed to withdraw all respective claims against each other, in the ongoing arbitration at the Singapore International Arbitration Centre, and all related legal proceedings initiated in the National Company Law Tribunal (NCLT) and other forums. The companies will also withdraw the respective Composite Schemes of Arrangement from the NCLT and inform the relevant regulatory authorities," they said in a joint statement.

"Under the terms of the settlement, none of the parties will have any outstanding or continuing obligations or liabilities to the other. The settlement stems from a mutual understanding between the companies to independently pursue future growth opportunities with a renewed purpose and focus on the evolving media & entertainment landscape, signifying the definitive conclusion of all disputes." the statement added.

The termination of the merger deal had put ZEEL in a vulnerable position with Sony initiating several litigations against it for the alleged breach of contract.

Sony had sent a termination notice to ZEEL wherein it also sought USD 90 million from it as a termination fee on account of alleged breaches of merger cooperation agreement (MCA) terms.

In February, Sony had formally called-off the $10 billion merger agreement with Zee, which had also sought around USD 90 million as a termination fee from Sony for the failed merger.

ZEEL performed positively on the revenue front with an 8% jump in the first quarter of FY25 to Rs 2,149 crore as against Rs 1,998 crore in the previous year's quarter.

During the Q4 results for 2023-24, ZEEL CEO Punit Goenka said he was confident of achieving the long-term aspiration of 18-20% EBITDA by FY 2026. The Q1 FY25 result looked like a step in that direction.

It also reported a net profit of Rs 118 crore in Q1 FY25, compared to a loss of Rs 54 crore in Q1 FY24.