Zee-Sony merger cancelled: CLSA downgrades Zee shares to sell
Zee Entertainment, global broking firm CLSA on Monday downgraded the stock to sell rating and warned investors that a valuation de-rating could be in the offing.
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View Details»«With the merger terminated, Zee’s valuation will likely decline to 12x PE levels (Aug-21) seen prior to the merger announcement. The stock had de-rated in the past during the promoter share pledging crisis (in 2019) and fall in business cash conversion,» said CLSA's Deepti Chaturvedi and Saurabh Mehrotra.
While downgrading Zee shares from Buy to Sell rating, CLSA has reduced its target price from Rs 300 earlier to Rs 198 now based on 12x 1-year forward PE.
Zee has received communication from Sony to terminate the merger and is seeking termination fee of $90 million on alleged breaches by Zee and even invoking arbitration against Zee.
Zee has denied Sony’s assertions of breach and that Zee’s CEO, Punit Goenka, was agreeable to step down in the interest of merger.
«Mr. Punit Goenka, MD & CEO of ZEEL, was agreeable to step down in the interest of the merger and proposals in this regard were discussed, including for appointment of a director on the Board of the merged company, protections for conduct of pending investigations and legal proceedings in the best interest of ZEEL’s directors and shareholders and the consequent modifications to the scheme to incorporate the same,» Zee said in a statement.
Zee had proposed a six-month extension for consummation of the transaction but Sony chose to terminate.
The company said it will continue to evaluate organic and inorganic opportunities for growth, leveraging the intrinsic value of its assets.
A merger with Sony would have
