Zee Entertainment Enterprise Ltd (ZEEL) on Wednesday said Invesco's actions of the past few weeks against the company and its board are motivated and are entirely extraneous to corporate governance issue. Refuting the allegations levelled by its single largest shareholder Invesco in its open letters to ZEEL shareholders on Monday to support their requisition for removal of MD and CEO Punit Goenka, it said comments were "unjustified and incorrect" and urged it "to stop publishing half-truths about the proposed deal".

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Over its proposed merger with Sony Picture Networks India (SPNI), Zee Entertainment Enterprise Ltd said it appreciates Invesco's need for information to evaluate the proposed deal, however, all the principal terms of the deal agreed with Sony in the non-binding term sheet have been disclosed by it on September 22, 2021. "It was also disclosed that we are in the process of negotiating definitive agreements with Sony and will be approaching all the shareholders of the company (including Invesco) for their approval as required under applicable law. All shareholders, including Invesco, will get the opportunity to evaluate and consider the deal in full at that stage," said ZEEL.

Invesco has raised questions over the merger with SPNI and had said the announcement to "gift additional 2 percent equity to the founding family via a non-compete that seems entirely unjustified, while also providing a pathway for the founding family to raise its stake from 4 percent to 20 percent via methods that remain wholly opaque". Replying to it, ZEEL said, in lieu of such non-compete obligations being undertaken by the present promoter group, the promoters of Sony will be transferring approximately 2.11 percent shares in the merged company to the promoter group. "We would like to highlight here that this will be a secondary transfer from the promoters of Sony (not a primary issuance) and, accordingly, will not be dilutive to any of the shareholders of the Company as it is a private arrangement between two shareholders, it said.

Also Read: Had made a fair offer to Zee; never resort to hostile takeovers: Reliance Industries

Over the increase of promoter's shareholding in the merged entity, ZEEL said the public announcement released by the company clearly states that "the promoter family is free to increase its shareholding from the current - 4 percent to up to 20 percent, in a manner that is in accordance with applicable law, indicating that the promoter shareholding in the merged entity will be capped at 20 percent." According to ZEEL, Invesco's actions of the past few weeks such as writing open letters against the company and the board have given "the board reason to believe that their actions are motivated" by concerns entirely extraneous to any corporate governance issue. "We are dismayed, that in the Open Letter, Invesco has cast unsubstantiated aspersions on the management of the company and has made comments in relation to the 'permissive culture' of the board, said ZEEL.

Moreover, five out of the six existing independent directors on the board of ZEEL have been appointed after Invesco's investment in 2019 and that the investment firm's views were "positively considered" at the time of making such appointments. Over Invesco's requisition for calling an Extra Ordinary General Meeting of the company, ZEEL said the matter (including in relation to the validity of the requisition notice) is sub-judice before the judicial forum and "we have the utmost faith and respect for our country's judiciary". "Unlike Invesco, we will refrain from commenting on the validity/legality of Invesco's requisition while the matter continues to be sub-judice," the company said. ZEEL has also challenged Invesco's requisition before the High Court of Bombay, by filing a civil suit.

Also Read: Zee has potential, but needs a new board: Invesco

Invesco along with OFI Global China Fund LLC holds a 17.88 percent stake in ZEEL, and has been pressing for an Extraordinary General Meeting (EGM) to discuss various issues, including the removal of Managing Director Punit Goenka and appoint its nominees of the board of the company. Earlier, in the day, Invesco, said it had tried to facilitate a possible deal between Reliance and the company but refuted claims it had pushed for the transaction at a lower valuation.

The latest statement from Invesco comes a day after Goenka told the company's board that Invesco had come with a proposal in February for a merger with certain entities owned by a large Indian group (strategic group) with inflated valuation "by at least Rs 10,000 crore". In a statement on Wednesday, Invesco mentioned that Reliance was the large Indian group. ZEEL, in its filing to the stock exchanges on Tuesday, had not disclosed the name of the group.

"We wish to make clear that the potential transaction proposed by Reliance (the ''Strategic Group'' referenced but not disclosed in the 12 October 2021 communication by Zee) was negotiated by and between Reliance and Goenka and others associated with Zee's promoter family," Invesco said. Hours after Invesco named Reliance Industries, Mukesh Ambani-led company said it had couple of months back made a proposal for merger of its media properties with Zee but dropped the offer over differences over stake of Zee founders.

Reliance Industries in a statement said Invesco had in February/March this year assisted in arranging discussions with Goenka, member of the founder family and Managing Director of Zee. "We had made a broad proposal for merger of our media properties with Zee at fair valuations" and wanted Goenka to continue as managing director and be entitled to ESOPs along with other management," it said. "However, differences arose between Goenka and Invesco with respect to a requirement of the founding family for increasing their stake by subscribing to preferential warrants. The investors seemed to be of the view that the founders could always increase their stake through market purchases," RIL said.

Disclosure: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

First Published:Oct 13, 2021 11:25 PM IST