Zee Entertainment stake knocked out the upper circuits in opening deals on Thursday posterior to a block deal on the NSE (National Stock Exchange) in which around 14.52 crore shares of the company were transferred. The book runner of this deal is presumably the Citigroup.
The pioneer and chairman of the television entertainment industry, Subhash Chandra announced the planning to sell 16.5% stake of its flagship company Zee Entertainment Enterprises to financial investors to clear mortgage debt to certain lenders of the group on Wednesday. OFI Global China Fund – a subsidiary of Invesco Oppenheimer Developing Markets Fund having 8.7 per cent shares in the media firm will buy 2.3 percent shares out of 16.5% shares. As of June 2019, Invesco Oppenheimer Fund is already in the possession of 7.74% share in Zee. It is one of the oldest venture capitalists of Zee who admitted to solicit an additional 11% stake in Zee from its promoters for Rs. 4,224 crore.
After this undertaking, the media baron Subhash Chandra will mislay control of Zee Entertainment Enterprises which means the promoter stake in Zee Entertainment will come down to 5 per cent. The three promoter companies-EMVL, Cyquator and Essel Corporate will offload 77 million, 61 million and 11 million shares apiece which is the total of 15.72 per cent of equity base. The term sheet document displayed that the selling price of stake will be fixed at an exhibitive price of Rs. 277 per share transferring the 10 per cent discount to Wednesday’s closing price of Zee at Rs.307 respectively.
The father of the television, Subhash Chandra started Zee Enterprises in 1992. Ever since its inception, the company spread its arms to enter infrastructure, education, packaging, precious metals, finance and technology sectors.
Holding the managerial control even after offloading the Zee promoter share sell is a big forward-looking, a value investor Safir Anand in a tweet said.
Lenders to Essel Group desponded a recommendation to park all the promoter shares in an escrow account till the fulfillment of the business-dealing. They also disclosed the apprehension about the absence of information respecting additional stake sale in Zee Entertainment. The lenders in the possession of Zee Entertainment shares are asking for the minutiae of the sale of additional 10 per cent. The lenders are spreading suspicions about the forecast of the deal as the Zee has dropped down over 40 per cent since the sale of 8.7 per cent stake to Invesco Oppenheimer in August.
It has come to the notice that Subhash Chandra led Essel Group currently presented an escrow arrangement to the lenders which included relocating the pledged shares to a separate account without revealing the identity of the prospective purchaser and the price at which it will be auctioned.
A spokesperson from the promoters group has revealed that the Essel Group has selected credible investment bankers to head the divestment procedure in the strive to allocate the sale proceeds to all lenders. He added that the investment bankers deal in their own way to obtain the highest possible price-point. As per the investigators of Emkay Global Financial Services, operating performance and balance-sheet advancement plays key role for revaluation in the near term.
Reason to Sale Stakes of Zee Entertainment
Subhash Chandra along with his family are indebted with over 7,000 crore to domestic lenders, inclusive of mutual funds and Russian lender VTB.
According to the shareholding data available on the exchanges, out of 22.37 per cent equity shares in Zee Entertainment, promoter and promoter group’s 96 percent shares are put up as collateral with lenders.
Adhering to an extension of eight months deadlock time limit, Puneet Goenka, chief executive officer at Zee Entertainment Enterprises Ltd., announced the enlisting of a financial investor on board. Essel group sold stake in Zee Entertainment declared not to offload its half equity to a strategic partner as decided earlier because this will not allow the promoter to comply with the timeline to repay lenders.
At first, the promoters prepared to auction half of its shareholding in India’s largest broadcaster to a global strategic partner. This declaration of divestment made in November would surely help in the transformation of Zee into a global media-tech player. Chandra was also engaged in the negotiations with diplomatic stockholders including a consolidation that included U.S. cable giant Comcast Corp., James Murdoch’s Lupa Systems and Blackstone Group Inc. Due to the timeline with the bestowers, it did not worked out with strategic partners.
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