ZEE Shares Surge 7% Amid Reports of Punit Goenka Considering CEO Role Transition in Sony Merger

The shares of ZEE Entertainment Enterprises Ltd (ZEE) experienced a notable increase of 7.38%, reaching a high of Rs 263.90 on the Bombay Stock Exchange (BSE). This positive movement indicates a surge in investor confidence or interest in ZEE’s stock.

Shares of ZEE Entertainment Enterprises Ltd (ZEE) saw a significant increase of over 7 percent in Thursday’s trading session. This surge in stock value was attributed to a media report indicating discussions between Culver Max Entertainment Private Limited (formerly Sony Pictures Networks India Private Limited) and ZEE regarding the completion of their merger.

There are reports indicating that ZEE Entertainment Enterprises Ltd (ZEE) might consider filing a suit against Culver Max Entertainment, alleging damages if the proposed merger between the two media companies does not materialize by January 20.

Following the reported developments, ZEE Entertainment Enterprises Ltd (ZEE) shares surged by 7.38%, reaching a high of Rs 263.90 on the Bombay Stock Exchange (BSE). This positive market reaction could be attributed to the news surrounding the ongoing discussions and negotiations related to the merger with Culver Max Entertainment Private Limited (formerly Sony Pictures Networks India Private Limited).

The stock had experienced an 8% decline in the last month, making this recent increase noteworthy. Reports indicate a disagreement between ZEE and Sony regarding the CEO role for the merged entity. While ZEE allegedly wanted its CEO Punit Goenka to take up the position, Sony purportedly preferred NP Singh, the CEO of Sony India, for the role.

Earlier reports suggested that ZEE Entertainment Enterprises Ltd (ZEE) might consider filing a lawsuit against Culver Max Entertainment, claiming damages if the proposed merger between the two media firms fails to go through by January 20. Sources cited by ET NOW indicate that Sony, the other party involved, is reportedly not inclined to extend the merger deadline beyond January 20. Sony seems to believe that if the merger falls through, it has no liability to pay any penalty.

The mega merger deal between ZEE Entertainment Enterprises Ltd (ZEE) and Sony Pictures Networks India, signed in 2021, was initially expected to be completed within two years before December 21, 2023. However, ZEE later requested Bangla Entertainment Private Limited (BEPL) and Culver Max Entertainment to extend the date required to make the merger scheme effective.

Subsequently, reports surfaced suggesting that Sony was considering calling off the proposed merger due to delays. In response, ZEE informed stock exchanges that Culver Max Entertainment Private Limited (CMEPL) and BEPL had decided to enter into good faith negotiations as required under the Master Creation Agreement (MCA) entered among the parties.

In anticipation of ZEE Entertainment Enterprises Ltd’s (ZEE) Q3 results, ICICI Securities expects the company to report a 15.9% sequential decline in consolidated revenue, amounting to Rs 2,050 crore. This projection takes into consideration a high base, as the Q2 revenues were notably boosted by the strong performance of ‘Gadar 2’.

According to ICICI Securities, the brokerage anticipates ZEE Entertainment Enterprises Ltd’s Q3 results to have certain key features. The estimated subscription revenue is expected to remain relatively stable at Rs 890 crore, showing a marginal increase of 1% quarter-on-quarter (QoQ) and 0.3% year-on-year (YoY). Advertisement revenue is projected to grow by 3% sequentially but experience a YoY decline of 5.2% to Rs 1,008 crore.

Given the sports-dominated quarter, the brokerage suggests that the allocation to sports channels may have increased compared to General Entertainment Channels (GEC). ICICI Securities estimates a QoQ decrease of 36.1% (and a YoY decrease of 37.1%) in EBITDA to Rs 210 crore for Q3FY24.

The brokerage expects ZEE to report a net profit of Rs 15.9 crore, indicating a 35% YoY decline. The performance of ad revenue is seen as showing signs of recovery. However, ICICI Securities notes that the stock price movement will likely be influenced by news regarding the Zee-Sony merger. The brokerage maintains an ADD rating on the stock with a target price of Rs 280, based on a forward P/E multiple of approximately 19x for the next year.

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