Sony-Zee merger: Invesco stands by EGM demand for board rejig

In a twist to the Zee Entertainment-Sony Pictures India merger saga, the stage is set for fireworks, with Invesco, the largest shareholder in the Subhash Chandra-backed firm, putting its foot down and insisting on the extraordinary general meeting (EGM) requisition which sought a newly reconstituted board and the removal of MD & CEO Punit Goenka.

The demands of Invesco in the EGM are in contrast to the terms of the Zee-Sony non-binding merger announcement which leaves Goenka in charge as MD & CEO.

In a letter dated September 23 to the board of directors of Zee Entertainment Enterprises, Invesco referred to the non-binding merger announcement and said “your disclosure of 22 September 2021 is symptomatic of the erratic manner in which important and serious decisions have been handled at the Company”. Moneycontrol has reviewed a copy of the letter.

To be sure, Invesco did not reject the deal negotiations with Sony and highlighted in the letter that the business of Zee Entertainment Enterprises is valuable, "whether on its own or in strategic alignment with partners such as Sony".

It added further, “a newly constituted board supported with the strength of independence will be best suited to evaluate and oversee the potential for strategic transactions, like the one announced on 22 September 2021 on a non-binding basis, as well as to make determinations on the future leadership of the Company.”

Elaborating on the rationale for the EGM requisition, Invesco said, “ Precisely to protect shareholder value and in exercise of our statutory rights as an ordinary shareholder, we have called upon the Company to hold an EGM, and it is your duty under company law to now do so. At this EGM, shareholders of the Company will decide the composition of the Company’s board of directors in a free and democratic manner.”

The firm ended the letter by saying, “We trust that the current board of directors of the Company will adhere to its fiduciary duties and not violate its statutory obligations to convene the EGM as requisitioned by Invesco under its letter dated 11 September 2021. We urge the board to reflect on this communication and act in the best interest of the Company, its public shareholders and uphold the highest standards of corporate and board governance.”

Invesco, which holds a 17.88 percent stake in Zee Entertainment, had proposed the names of six independent directors as part of the EGM requisition. It did not respond to a set of detailed queries from Moneycontrol which sent multiple reminders.

A company spokesperson for Zee Entertainment said, "The Board is seized of the matter. The Company will take necessary action as per applicable law”.