MUMBAI: Mergers are normally expected to deliver the goods. But what about demergers? The expectation is just about the same.
The Subhash Chandra-promoted Zee Entertainment Enterprises Ltd (Zeel) is expecting a major boost in its operating profits, with its proposed demerger of regional general entertainment channels (R-GECs) from Zee News Ltd (ZNL).
Zeel, which at present holds the non news and non regional channels from the Zee bouquet, said that with the demerger, it will be possible to use its content library more effectively as dubbing it in other languages will enable it to air it on its other language channels. Additionally, the cross selling of channels will also be possible with the increase in the cluster size, the management says.
The demerger will also help generate cost savings in the selling and distribution expenses of Zeel. It said that redundancies would be eliminated and this will further boost the company’s operating profit.
Zeel and ZNL have called for an EGM on 29 December to take the approval from their respective shareholders on the proposed scheme of arrangement.
For the merger of six of ZNL’s R-GECs in Zeel, the two companies’ boards have approved issuing four Zeel shares for every 19 ZNL shares.
As per the scheme, Zeel will add Zee Marathi, Zee Bangla, Zee Talkies, Zee Telugu, Zee Kannada and Zee Cinemalu (yet to launch) along with the assets and liabilities pertaining to these businesses. It will also add the assets of Zee Gujarati, a discontinued channel, including
programme rights and IPRs.
Post scheme, the promoters’ holding in Zeel will go up to 42.82 per cent from present level of 41.50 per cent. ZNL’s promoters holding will remain the same at 54.14 per cent.
Post the acquisition and the issuance of new shares of Zeel to ZNL, the effective paid up capital of Zeel would be Rs 484.48 million as compared to Rs 434.01 million earlier.