CCI Gives Conditional Nod To Zee-Sony Merger, Formal Order Awaited

The Competition Commission of India (CCI) on Tuesday granted conditional approval to the proposed merger of Zee Entertainment Enterprises (ZEEL) with Sony Pictures Networks (SPN) India.

A statement from SPN and Zee confirmed the approval.

“We are delighted to receive CCI approval to merge ZEEL with SPN. We will now await remaining regulatory approvals to finally launch the new merged company, which will create extraordinary value for Indian consumers,” read the statement from Sony.

A statement from Zee said that CCI had granted the approval in Phase 1 after evaluating the official legal and economic submissions made by the company.

“Considering the immense value which the proposed merger will generate for all its stakeholders, the company has offered the necessary remedies in accordance with the regulator’s guidelines. In its official communication on October 4, the CCI has granted approval in Phase 1,” said Zee.

A formal order by CCI, however, is yet to be issued in the matter.

The Zee-Sony combine, according to informed sources, may drop channels in the Marathi, Bengali, and movie genres to comply with CCI conditions of no concentration of power.

“This is not the end of the story as far as the CCI approval process is concerned,” Akshayy S Nanda, partner, competition and data protection practice at Saraf & Partners, said, adding, “The parties will need to comply with the conditions within a stipulated time frame for the final approval to kick in.”

CCI is likely to first issue a one-page order before a detailed order is released in about four to six weeks, said Nanda.

Last month, the National Company Law Tribunal had asked Zee to convene the meeting with its shareholders on October 14 to seek approval for the proposed merger.

In Hindi general entertainment, the merged entity may let go of ‘flanking channels’ such as Zee Anmol, Sony Pal, and &TV to adhere to CCI norms, informed sources.

Zee TV and Sony Entertainment Television are the flagship channels in Hindi general entertainment. The two players have a combined viewership share of 36 per cent in Hindi general entertainment, according to year-to-date data from the Broadcast Audience Research Council India sourced from the industry.

In Hindi movies, the combined viewership share is 33 per cent, while in Marathi and Bengali entertainment, the combined viewership shares are 38 per cent and 26 per cent each.

Zee and Sony had been in discussion with the antitrust regulator for over a month to resolve issues with regard to the proposed merger.

Ahead of CCI approval, the BSE and the National Stock Exchange had given their go-ahead for the proposed merger on July 29.

To put things in perspective, the Zee-Sony combine will become India’s second-largest entertainment network by revenue with over 75 television (TV) channels, along with two video streaming services — ZEE5 and SonyLIV. It will also house two film studios — Zee Studios and Sony Pictures Films India — and a digital content studio (Studio NXT).

The statement by SPN said that the merged entity will lead the consumer transition from traditional pay TV into the digital future. The combine will compete with rivals such as Disney-Star and Reliance-Industries-backed Viacom18.

First announced in September last year, the merger was approved by the boards of the two companies in December after a 90-day due diligence period.

Under the terms of the arrangement, Sony will hold 50.86 per cent stake in the merged entity. The promoters of Zee will hold 3.99 per cent and other Zee shareholders will hold 45.15 per cent stake in the combined company.

Sony will also inject cash of $1.5 billion into the merged entity to enable it to drive sharper content creation across platforms, strengthen its footprint in the rapidly evolving digital ecosystem, and pursue other growth opportunities.

According to Karan Taurani, senior vice-president at Mumbai-based brokerage Elara Capital, the merger will bring in significant synergies of scale.

“Multiple synergies exist for the merged entity, which include ad price hikes, cost savings on content, marketing and employee strength, and better bargaining power with distributors,” he said.