Zee Entertainment Enterprises Limited (ZEEL) has created a new organizational structure under which CEO Punit Goenka will assume direct charge of key business verticals, including the domestic broadcast business.

Amit Goenka, who has been spearheading the streaming business, will take direct charge of original content, including movies, besides assuming additional charge of the international broadcast business, enterprise technology, and broadcast operations & engineering. He will continue to report to Punit.

ZEEL, which has four key business segments, namely broadcast, digital, movies, and music, has also elevated key executives. The reorganization is in line with the company's aim of achieving 18–20% EBITDA margin by FY26.

Ashish Sehgal will be responsible for integrated ad sales for the broadcast and digital businesses. In this enhanced role, he will also report to Amit for digital business revenue. He will continue to report to Punit for the broadcast business revenue.

Siju Prabhakaran, who leads the South cluster of channels, will take additional responsibility for the West cluster. Samrat Ghosh, the current head of the East cluster of channels, will take additional responsibility for the North and Premium clusters.

Ruchir Tiwari will continue to lead the Hindi Movies cluster, while Vishnu Shankar will continue to lead Hindi GEC &TV and the FTA segment.

Following the exit of Zee Studios CEO Shariq Patel, Umesh Bansal will lead the movie business. Anurag Bedi will continue to lead the music business and enhance the vertical’s contribution to the company’s bottom line.

The reorganization comes in the wake of the collapse of the merger deal with Sony Group Corp's India entities and the exit of senior executives like Rahul Johri (president-business), Punit Misra (president-content), and Nitin Mittal (president-technology).

The company has decided to lay off 15% of its more than 4,500 employees to reduce costs.

ZEEL Chairman R. Gopalan said the board has reviewed and approved the lean organization structure proposed by Punit, which aims at streamlining the organization and improving efficiencies across the business.

"The strong and capable set of leaders identified for each core business segment in the lateral structure is highly reflective of the company’s deep bench strength and ensures that the company remains well-positioned for the future," he added.

Punit said the new structure encompasses a more resilient team for the organization to ensure agility and collaboration. "Through this restructuring exercise, our aim has been to build an independent and enterprising team led by an experienced set of leaders to drive the company forward."

Mumbai: No twist is too dramatic for serialized shows that are staple of nighttime television in India's vast market for general entertainment. It's no different, it appears, in the two-year-long saga that has sought to create the country's largest entertainment company by a merger.

Zee Entertainment Enterprises (ZEEL) has re-engaged with Sony Group Corp in a last-ditch attempt to revive their $10-billion merger, which had been officially called off on January 22, people aware of the matter said.

Representatives from the two sides have held meetings across locations in Mumbai and efforts to salvage the deal have gathered momentum over the last fortnight. However, major differences are yet to be sorted out, and that could yet lead to the failure of the renewed talks, with both sides sticking firmly to their positions, as per executives aware of the matter.

Zee is expected to inform Sony over the next 24-48 hours if it’s willing to accept all terms and conditions, including conditions precedent (CPs), and go ahead.

Else, by the end of this week, Sony is expected to pull its original merger application filed with the National Company Law Tribunal (NCLT) over two years ago, when the two had agreed to merge.

A reconciliation on the other hand would mean legal proceedings that have been initiated will be withdrawn. Sony and Zee have both approached various forums, including the Singapore International Arbitration Centre (SAIC) and the national company law tribunal (NCLT) over the matter.

Among the key points of difference now is a $300 million write off on cricket rights that needs to be settled before any agreement is signed. While Sony wants the write off/impairment to be booked upfront, Zee is seeking a postponement.

On the other hand, Punit Goenka, MD and CEO of ZEEL, is believed to have agreed to “relinquish” his previous demand of being made the CEO of the merged entity. Sony was completely opposed to him being the top boss of the merged company until he was cleared of charges related to money being diverted from Zee to closely held companies owned by his family’s Essel Group. Sony has maintained Goenka can at best be an adviser to the merged entity.

There is also disagreement over honouring some of the important CPs that are still “outstanding,” said the people cited above. Zee is pushing for any deal to be legally “irrevocable” once signed, but Sony is hesitant about making such a commitment. The original agreement between the two sides was signed in late 2021. Since then, significant value erosion has taken place and financials have worsened so Sony as an MNC does not want to get into any further binding agreements and is “hence uncomfortable with this”, said one of the executives cited.

Zee’s senior leadership on the other hand is confident that the company is on the mend after net profit in the quarter ended December jumped 141% to Rs 58.5 crore even as revenue dipped 3% to Rs 2,045 crore. Streaming arm ZEE5 is on an uptrend with the Q3 operating loss narrowing 13.4% to Rs 244 crore while revenue rose 15% to Rs 223 crore. On Monday, the Zee stock closed at Rs 178.65, down 3%.

A Zee spokesperson declined to comment, saying the matter is sub judice. Messages to Punit Goenka remained unanswered. Emails sent to Sony International did not get any response.

During an investor call on February 13, Goenka had said: “I certainly wanted the merger to be implemented. In line with this aspiration, we even took several steps towards divestment or closure of profitable businesses in the domestic and international markets. I personally offered several proposals and solutions to Sony, to address their demands, but unfortunately, they remained unaccepted.”

Following the termination of deal talks late last month, Mad Man Film Ventures, which Sony has called a proxy for Zee, moved the NCLT seeking implementation of the merger scheme between Sony and ZEEL. Sony’s India units Culver Max Entertainment and Bangla Entertainment have filed applications before the NCLT challenging the maintainability of ZEEL’s application seeking implementation of the merger scheme.

In its January 24 plea at the NCLT, Zee asked the tribunal to prevent Sony Group-owned firms from adopting any further steps that could jeopardize the implementation of the scheme.

The Mumbai bench of the NCLT has clubbed ZEEL's plea with that of shareholder Mad Man Film Ventures and has posted the matter for hearing on March 12, ET reported February 6. Mad Man Film Ventures has also urged the tribunal to appoint a committee comprising two directors each from Zee and Sony to oversee the implementation of the composite scheme of arrangement.

On February 4, the SIAC denied emergency interim relief to the Sony Group-owned entities against Zee, stating it has no jurisdiction to prevent the latter from approaching the NCLT and that the tribunal is the appropriate forum to handle the dispute.

The Goenka family owns 3.99% equity in ZEEL. The rest is held by public and institutional shareholders.

After the two media giants terminated talks on January 22, Zee’s stock rose as much as 14%. However, over the past month, it’s dropped 24%. Indian mutual funds and insurance companies including LIC hold 31% of the company. FIIs owned 28.19% as per December 2023 data.

Zee had told analysts after its third-quarter earnings call that it plans to review the entire business portfolio following the collapse of the merger.

“We will be relooking at the entire portfolio of the business to see which businesses will add the maximum value to our portfolio and, therefore, what we need to focus on, and what we do not need to focus on going forward," Goenka had told analysts.

(With additional reporting by Ashutosh R Shyam)

Earlier this week, the much talked-about merger between Sony and Zee Entertainment, which would have created a media powerhouse of sorts, fell through with the former pulling out of it. The company reportedly called off the deal stating terms of its merger agreement were not met, and has demanded $90 million in termination fees via arbitration. While Zee has initiated its counter-challenge, CEO Punit Goenka is simultaneously exploring legal avenues to challenge the SEBI investigation for suspected siphoning of company funds.

To make matters worse, on January 23, the company witnessed a 30 per cent drop in its share price during the early trading hours. Clearly, troubles are mounting for Zee Entertainment, and its future remains ambiguous.

Despite the recent events, it’s business as usual in the corridors of Zee Studios and Zee5. An industry insider points out that on paper, Zee Studios had a successful 2023. “It enjoyed box-office successes in Gadar 2: The Katha Continues and Mrs Chatterjee vs Norway. Joram, starring Manoj Bajpayee, was critically acclaimed while Karisma Kapoor’s Brown was the only Indian series to be premièred in Berlin. Currently, they might hit pause on fresh films until the company’s future plan is chalked out. But they have two big titles in 2024, Kangana Ranaut’s Emergency and Ajay Devgn’s Maidaan, and work on them is moving in full force,” says the source.

We are told that there have been no interruptions in the functioning of the media house’s OTT platform Zee5. It plans to acquire more series in regional languages this year.

Another source says, “The market panic hasn’t penetrated into the company’s day-to-day affairs. The modus operandi at Zee5 has been to focus on subsequent seasons over new series. So, this year, they have the second season of The Broken News, and Taj’s third chapter in development.”

At a time when Reliance Industries Limited and Walt Disney are working out a merger deal between their respective media assets Jio Cinema and Disney+ Hotstar, Zee will need a strong plan of action to survive the robust competition.

The source indicates that Gautam Adani’s AMG Media Networks is likely to invest in Zee. “After its advent into the news network last year, Adani might back Zee. The media house will start commissioning a fresh slate only after March; by then, they hope to have more clarity.”

Mumbai: After two years of deadlock in negotiations, Japan’s Sony Corp on Monday called off its proposed $10 billion merger between its India unit and Zee Entertainment Enterprises. Sony Corp’s 62-page merger termination notice came just when Zee had requested it to extend the deal deadline.

While Sony cited unmet merger conditions as the reason for the termination, the two companies have been wrangling over who will lead the combined entity. Zee proposed MD Punit Goenka would be at the helm, but Sony disagreed in the light of a regulatory investigation against him and wanted its nominee, India MD N P Singh, to run the show. The Japanese giant has sought $90 million from Zee as termination fees for breaches of the merger pact and has invoked arbitration. Zee has refuted all of Sony’s assertions and said it will take legal action against the latter as well as contest its claims in arbitration proceedings.

The collapse of the merger is expected to have a negative impact on both Sony and Zee.

The collapse of the Sony-Zee merger negotiations comes at a time when the market is going through digital disruption and consolidation, where Reliance Industries’ Viacom18 and the India unit of Walt Disney are planning a merger.

“After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied... We remain committed to growing our presence in (India’s) vibrant and fast-growing market,” said Sony. It, however, didn’t specify what conditions were unfulfilled.

Sony further said that even after the two-year deal timeline ended on Dec 21, 2023, it was engaged in “good faith discussions” with Zee for 30 days to make the merger effective but both “were unable to agree upon an extension by the Jan 21 deadline”.

Zee said Goenka had agreed to step down in the interest of the merger and had discussed the appointment of a director on the board of the combined company. It further said it had proposed “protections for conduct of pending investigations and legal proceedings in the best interest of its directors and shareholders”.

Zee also said that it had requested Sony to extend the merger deadline by six more months after the 30-day grace period lapsed. However, Sony “did not provide any counter proposal for extension”, it said. “These discussions did not result in any proposal from Sony but they rather have chosen to terminate,” it stated. Goenka, who was in Ayodhya for the Ram temple ceremony when he received the message that Sony had called off the deal, posted on X that he sees the development as “a sign from the Lord”, adding that he would move ahead positively and work towards strengthening Zee for all its stakeholders.

Markets regulator Sebi is conducting investigation against Goenka for alleged diversion of funds from Zee to promoter entities. A final order is yet to come. Earlier, Sebi had barred Goenka from holding directorships in any listed entity. But Securities Appellate Tribunal reversed the interim order and directed Sebi to complete the investigation.

Zee, which spent Rs 176 crore on merger-related expenses in FY23, said it will continue to “evaluate organic and inorganic opportunities for growth, leveraging the intrinsic value of its assets”.

Zee is contending with falling profits and cash reserves in a highly competitive market where streaming majors such as Netflix and Amazon Prime are fighting for share. “With the merger terminated, Zee’s valuation will slump back to 12 times its price to earning (PE) levels seen prior to the merger announcement,” foreign brokerage CLSA said.

“The stock had derated in the past during the promoter share pledging crisis (in 2019) and fall in business cash conversion. We downgrade Zee from buy to sell on a revised target price of Rs 198 (prior price was Rs 300).”