Zee Entertainment has signed a merger deal with Sony Pictures Networks India Private Limited, the company said in an exchange filing, on Wednesday. Punit Goenka will continue to provide services to the merged company as MD and CEO for a period of 5 years. Zee Entertainment will hold 47.07 percent, while Sony India will hold 52.93 percent stake in the merged company.

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In an analysts’ concall last evening, Punit Goenka said that the board has not reached out to shareholders like Invesco and LIC on the proposed transaction with Sony. Goenka said, “Sony will also come on board as a promoter in the merged entity and will have the right to appoint majority directors on the board, which will manage and control the business and affairs of the company.” Goenka also went on to say that he does not see any risk to the transaction and stated that no open offer will be needed.

Meanwhile, the management of Zee said, “As a part of the deal, there is a transfer of certain stake which will happen from Sony to the promoters, so that the promoters don't enter into a conflicting business. So the resulting shareholding post this transaction for the existing promoters is going to be 4 percent. But just to make it clear, the company is not going to pay to the promoters anything. This is a transfer from Sony to the promoters. This is a transfer in lieu of the family not entering into a conflicting business. Sony has made it clear that the appointment of Mr Goenka as MD and CEO is an integral part of the deal. We will be taking this as a composite scheme. We haven't reached out to the shareholders.”

To discuss the recent developments, CNBC-TV18 spoke with Amit Tandon, MD, IiAS, and Karan Taurani, SVP research analyst, Elara Securities.

First up, Tandon said, “It would be a bit early to say because based on what has been disclosed – there are parts of the transaction, we have some concerns about and there are parts which we don't understand. One, the fact that you are creating a larger entity with deeper pockets, you have got access to someone who understands the media space is something, which we welcome. We are not a great supporter of the non-compete fees being paid to the promoters, though we recognise in this instance, it's a deal between Sony Television and the promoters and the shareholders in that sense are not directly affected. But nonetheless, realistically, you have to recognise that the market itself has changed very significantly and therefore, you need very deep pockets to start investing in this sector and that's something which has been affecting the promoters.”

He further said, “What we don't understand at this moment, is this whole agreement, taking it from 4 to 20 percent, I understand it's a part of the shareholder agreement, it can't be something which the company itself commits to. Does it mean that Sony transfers its shares, do they get to buy from the market, etc. This is something which is not clear and could become a little bit contentious as far as the investors are concerned.”

However, Tandon believes that the shareholders can take a great deal of comfort in the fact that Sony is now sitting in the boardroom and providing adult supervision.

Meanwhile, Taurani said, “This is a very good structural move, there will be a rerating in the stock, you have an MNC-backed promoter, all your corporate governance issues go away. Then you have someone like Punit Goenka, who is very good in terms of running the broadcasting business, Zee has been one of the most profitable companies in the TV segment today.”

He further mentioned, “They need to only work on the digital segment where there is a lag, where the segment is dominated by larger players like YouTube, Hotstar, etc. That is where the major play is, otherwise TV business is where there’s too much of synergies, which can be shared between both the companies, which can work very favourably for the entity.”

For the full discussion, watch the video

(Edited by : Dipika Ghosh)