sony-zee merger collapse: ICICI Prudential MF dumps 2% ZEE stake following Sony-merger collapse

ICICI Prudential Mutual Fund has sold a partial stake in Zee Entertainment amid a price crash following the termination of a merger with Sony.

According to an exchange filing, I-Pru MF has sold 2.06 crore shares or 2.15% stake between January 20 and January 30 in a series of secondary market transactions.

At the end of the December quarter, the fund house held a 7.25% stake in the company and post the stake sale, it has about 5.09%.

On January 22, Sony decided to pull the plug on the $10-billion merger with ZEE, resulting in a share price crash. In the last two weeks, the stock has lost 27%.

Since the announcement two years ago, the Zee-Sony merger treaded on a thin line over multiple issues, the main one being Punit Goenka’s firm stand of running the combined entity.

The deal would have created an Indian TV juggernaut with more than 90 channels across sports, entertainment and news that would have competed with the likes of Walt Disney and billionaire Mukesh Ambani’s Reliance.The collapse of the deal is a bigger setback for Zee, according to analysts.It was initially expected that the deal would be completed within the stipulated deadline of December 2023. However, Zee requested Sony to extend the deadline to resolve critical issues.

After Zee requested an extension, Sony was reported to file a termination notice before the extended January 20 deadline, which eventually turned out to be the case.

Post the merger collapse, many brokerages downgraded the company’s stock and revised target prices.

Zee is facing stiff competition from digital media and a potential threat from the merger of RIL-Disney in the near term. The company has reported muted growth/profitability performance in the past two years, as revenue growth has converged (flat in FY20-23) and EBITDA margin dipped to 10.7% due to: losses in the OTT segment and lower growth in linear TV segment.

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