Zeel responds to Invesco’s Open letter, dismisses allegations regarding Sony-Zeel merger

Invesco had released an Open letter calling the Sony-Zeel merger a 'camouflage'

New Delhi: Zee Entertainment Enterprises Ltd (Zeel) has responded to Invesco’s Open letter, clearing the air regarding certain accusations made by the investors regarding the Zeel-Sony merger.

In its biting Open letter issued on 11 October, Invesco Developing Markets Fund and OFI Global China Fund LLC who combined own 18 per cent stake in Zeel had compared the Zeel-Sony merger to nothing more than a ‘camouflage’ to distract from the main issue. The investors had also accused the Company of “repeated governance failure” and “underperformance", and said the deal "favours certain shareholders".

On Wednesday, Zeel responded saying Invesco's statements were “half-truths” and urged the investors to let the Board of directors of the Company and the management work towards finalising this deal, which according to it is “clearly for the benefit of all stakeholders.”

Referring to Invesco's statement that it "will firmly oppose any strategic deal structure that unfairly rewards select shareholders, such as the promoter family, at the expense of ordinary shareholders," Zeel said, that their (Invesco’s) stance runs contrary to the very deal Invesco was itself proposing only a few months ago (referring to the deal with Reliance whose details were shared by MD Punit Goenka in a letter to the Board.)

“By way of comparison, the quantum of shareholding proposed to be transferred to the promoter group in the Sony Deal is substantially less (by as much as approx. 4 per cent) than what was being proposed by Invesco in the deal brought by them,” said the Company. Furthermore, the transfer of approx. 2.11 per cent shares by the promoters of Sony is a secondary transaction that will not be dilutive to any shareholder of the Company, unlike the proposal deal with Reliance.

The Company also emphasised that as per the terms of the deal with Sony, the promoter family is free to increase its shareholding from the current – 4 per cent to up to 20 per cent, but in a manner that is strictly in “accordance with applicable law.”

Zeel also dismissed the allegations made regarding the Sebi advisory letter to Zeel in June 2021, which according to Invesco raised “lack of governance oversight by Zeel’s current board." The Company stated that Sebi had also suggested some corrective measures and Invesco has been working alongside the Company in taking and recommending corrective measures all along.

“All these facts and Invesco's silence as regards these issues in its own requisition notice, gives us a reason to believe that Invesco 's recent actions are inconsistent with their past behaviour, and have been undertaken as an afterthought after various investors and analysts have sought to understand the rationale behind Invesco's actions of these past few weeks,” said the Company.

Zeel also pointed out the apparent ‘lack of transparency' from Invesco’s side, as it did not disclose the fact that they were negotiating a deal on behalf of the Company without any authority, even while criticising the Sony deal by way of the Open Letter disclosure made by the Company to the stock exchanges on 12 October. It was only Zeel made a disclosure, that Invesco came out with the details.

The Company also dismissed the ‘unsubstantiated aspersions on the management of the Company and has made comments in relation to the "permissive culture" of the Board, and said that five out of the six existing independent directors on the Board of the Company were appointed after Invesco's investment in 2019 and that Invesco was consulted and their views were positively considered at the time of making such appointments.

“Accordingly, Invesco's actions of the past few weeks, open letters against the Company and the Board and their general lack of transparency, have given the Board reason to believe that their actions are motivated by concerns entirely extraneous to any corporate governance issue,” said the Company.

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