Punit Goenka, Managing Director and CEO of Zee Entertainment Enterprises Ltd. (ZEEL), yesterday (12th October) disclosed to the Board of Directors that Invesco Oppenheimer Developing Markets Fund, which was now seeking his removal from the Board, had approached him in February this year with a proposal merger with “a large Indian group”. Goenka did not name the group but added that two representatives of Invesco, viz. Aroon Balani and Bhavtosh Vajpayee presented a merger deal to him involving Zee and “certain entities” owned by the large Indian group (strategic group) on February 23, 2021. He added that as per the deal, the shares of Zee were valued at Rs. 220 per share with a total valuation of the company’s public shareholding at Rs. 21,129 crore. The value of the entities owned by the strategic group, added Goenka, was considered at Rs. 17,500 crore which, he explained, was around Rs. 10,000 crore more that the real value.
Goenka elaborated that the strategic group would infuse Rs. 14,000 crore into the merged entity, pursuant to which the strategic group’s shareholding would increase to around 60%. While the strategic group would then hold a majority stake in the merged entity, Goenka was offered the position of MD and CEO but the stake of the family would continue to be 3.99%. Of course, Punit Goenka would be given employee stock options (ESOPs) representing upto 4% of the shareholding of the merged entity and hence the existing promoter group of the company would hold up to 7-8% in the merged entity, as per the document uploaded on the bourses.
Goenka then informed the Board that he had rejected the deal after expressing his apprehension to Invesco that the merging entities of the strategic group were overvalued and this would result in a loss to the Zee shareholders to the tune of around Rs. 10,000 crore. When he conveyed this to the two Invesco representatives, Goenka added, he was told that the deal would go through with or without him (Punit Goenka) even though they believed that he was best suited to lead the merged company. Invesco told Zee that the valuations had been unilaterally agreed by Invesco, and that there was no room for further negotiations on the commercial side. There were several correspondences on record to prove that Invesco had then acknowledged Goenka’s reputation, experience and capability as a professional and had insisted that he would be paramount in leading the operations and business of the merged entity as his absence would erode shareholder value.
These disclosures came a day after Invesco wrote an open letter to Zee’s shareholders stating that it would firmly oppose any strategic deal structure that “unfairly rewards” select shareholders such as the promoter family, at the expense of ordinary shareholders. The Zee Board of Directors has said that Invesco’s open letter runs contrary to the very deal which Invesco was proposing a few months ago. In the open letter, Invesco has sought the removal of Punit Goenka as MD and CEO.