For Zee’s investors, a teary two-year ride

livemint.com:

BENGALURU : Three months after Zee Entertainment Enterprises Ltd’s largest investor, American money manager Invesco, first blew the bugle of shareholder activism in September 2021 and demanded a reconstitution of the company’s board, media mogul Subhash Chandra signed a merger agreement with Japanese giant Sony Corp. On 22 December, 2021, Zee and Sony proposed to create a $10-billion media behemoth in which Sony would own 50.88% and the Chandra family 3.99%, with the remaining shares held by public investors. The news of the announcement in the media in the run-up to the formal announcement had pushed up the share price: Zee shares were up 90% from 11 September, when Invesco’s letter to the Zee board was shared with the stock exchanges.

The proposed merger was considered to create shareholder wealth. Eleven brokerages had at the time penciled in a 20% rise in the Zee stock, expecting the share price to increase to ₹400-450 apiece over the next 12 months, according to a review of analyst notes by Mint. But not all were convinced.

Bhavtosh Vajpayee, director of research, tech sector, at Invesco, had his doubts and remained skeptical if the merger would ever close. Fears about the merger not consummating turned real on Monday, when Sony ended its over two-year engagement with Zee. Sony in a press statement said it was “extremely disappointed" in failing to close the merger.

But the Japanese giant should have looked at the suspicions of a large number of foreign investors, many of whom had decided to sell their stake in Zee even before both parties formally called off the merger. Back in December 2021, foreign institutional investors owned 52.21% of the country’s largest listed media and entertainment company. Two years