Zee-Sony merger: CLSA downgrades Zee Entertainment to ‘sell’, slashes target price by 34%

livemint.com:

Mint Explainer: The collapse of Sony-Zee merger and its wider implications The global brokerage firm has further slashed the target price of Zee Entertainment stock by 34% to ₹198. Sony has formally asked Zee to halt the merger, while simultaneously seeking a termination fee of $90 million, alleging breaches on the part of the Indian media giant. Sony has escalated the matter by initiating arbitration proceedings against Zee.

Contrarily, Zee is challenging Sony's assertions of breach, contending that its CEO, Punit Goenka, was even prepared to step down in the spirit of facilitating the merger. The cancellation of the highly anticipated merger has reignited concerns about Zee's corporate governance, especially in light of the unprecedented promoter share pledging crisis in 2019. During that crisis, the company's promoters, the Essel Group, repaid loans through multiple stake sales to investors.

Also read: Sony demands $90 mn from Zee after terminating deal Meanwhile, CLSA highlighted the considerable competitive challenges anticipated for Zee, serving as an additional deterrent for the stock. The firm foresees heightened competition in the media sector, particularly with the reported merger of Reliance and Disney Star. The brokerage firm also sees a decline in the valuation of the company.