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US fund supervisor Invesco has stepped up its battle with the founders of India’s largest listed media firm, Zee Leisure, elevating issues over a proposed $1.6bn takeover by Sony in a uncommon case of overseas shareholder activism in India.
In a letter to Zee shareholders on Monday, Invesco — the most important shareholder with an 18 per cent stake — stated the phrases of the Sony-Zee merger unveiled final month appeared to favour the group’s founding household, which owns simply 4 per cent of the fairness, on the expense of different traders.
The Invesco letter reiterated its demand, first made on September 11, for a rare basic assembly in order that shareholders can vote on the elimination of chief government Punit Goenka, the son of Zee’s founder Subhash Chandra, and a board overhaul due to issues about monetary efficiency and company governance.
Invesco additionally stated any strategic deal for Zee with Sony Footage Networks India or different potential companions ought to be thought-about by an impartial new board, on condition that Zee was “a highly-undervalued asset, mired in innuendo and monetary volatility”.
“We’ll firmly oppose any strategic deal construction that unfairly rewards choose shareholders, such because the promoter household, on the expense of different shareholders,” wrote Justin Leverenz, chief funding officer of Invesco Creating Markets Equities. “The conduct of an EGM is a shareholder proper which we anticipate to train.”
Earlier this month, Zee’s board rejected Invesco’s demand for an EGM and challenged it in courtroom. Final week, Chandra made an emotional look on primetime tv accusing the US fund supervisor of mounting an unlawful covert takeover.
In an announcement on Monday, Leverenz criticised Zee’s founding household and present board, saying their “actions and rhetoric seem geared toward avoiding true accountability for the governance lapses and shareholder worth destruction over which they’ve presided”.
He additionally stated Invesco was assured that Zee had the “potential for large progress and success if it have been correctly managed”.
Zee stated it had no instant touch upon the letter.
Zee TV, India’s second largest media firm by viewer numbers, operates a clutch of fashionable information and leisure channels catering to India’s fast-growing Hindi leisure market.
Earlier than Invesco’s intervention, Zee’s share worth had greater than halved over the previous 5 years, whereas India’s total inventory market indices doubled in worth.
Chandra’s personal shareholding within the enterprise dropped from 35 per cent to 4 per cent in 2019, as he bought stakes in his profitable media enterprise to repay money owed from troubled infrastructure initiatives.
Sony and Zee unveiled the non-binding phrases of a possible merger, which might create one in every of India’s largest media conglomerates, 11 days after Invesco known as for an overhaul of Zee’s board.
Underneath the phrases of the merger proposal, Sony Footage Networks India would pay $1.6bn for a 53 per cent stake within the mixed entity, whereas Goenka would keep as chief government. The phrases additionally present for Chandra’s household to lift their stake in Zee to twenty per cent, with out specifying how this might happen.
Analysts have stated Sony’s majority possession might enable Zee to profit from Goenka’s trade expertise, whereas bettering checks and balances on the corporate’s funds and governance.
Nevertheless, Invesco stated it considers Sony’s non-binding proposal “not more than camouflage on the a part of Zee to divert and distract from the first challenge dealing with the corporate”. Nevertheless, the corporate additionally stated it will “gladly consider the transaction in a constructive spirit” if extra particulars have been made obtainable.
Sony declined to remark.
Zee’s shares closed up 3.4 per cent on Monday, in line with the BSE. General, the corporate’s shares have risen 67 per cent because the Invesco revolt started.
Extra reporting by Leo Lewis in Tokyo
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