Zee-Sony merger gets CCI nod: Sony sees a digital future

ZEE Entertainment Enterprises Ltd. (ZEEL) today received an approval from the Competition Commission of India (CCI) for its proposed merger with Culver Max Entertainment Private Limited (formerly Sony Pictures Networks India Private Limited).

In its official communication issued today, the CCI has granted the approval in Phase-1 after evaluating the official legal and economic submissions made by the company. The approval from the CCI is a yet another positive step in the overall merger approval process.
In its order pronounced on 7th September 2022, the National Company Law Tribunal (NCLT) advised the company to convene and conduct the meeting with its shareholders on 14th October 2022, to seek their approval for the proposed merger.

The Composite Scheme of Arrangement remains subject to applicable regulatory and other approvals.

Regarding the merger, SPNI said in a statement: “We are delighted to receive CCI approvals to merge ZEEL into SPN. We will now await remaining regulatory approvals to finally launch the new merged company. The merged company will create extraordinary value for Indian consumers and eventually lead the consumer transition from traditional pay TV into the digital future.”

No major channel to go off air Zee and Sony may switch off certain channels in order to meet requirements of CCI for the merger. Karan Taurani, Senior Analyst at Elara Capital, says that since there is no major overlap for the companies, he doesn’t expect any large flagship channel to go off air.

“We believe smaller channels (niche genres – rural GEC , Bangla etc.) and ones that may switch off basis each one’s strength (for example, Sony May switch off Bangla since their share is minimal there); this in turn would not have a big impact on the overall revenue drivers and earnings,” he added.

In terms of viewership share, the analyst says, Zee and Sony are at below 40% as a combined entity, except the movie genre which is above 50%. Any indication of a flagship urban GEC channel shutting down by either of the broadcasters is a big risk in our view as that drives a reasonable portion of revenues due to higher pricing. In terms of synergies on advertising, we don’t see a big concern to hike rates over medium term for the broadcasters as they will stand to play on each other’s strengths , which may lead to convergence of pricing gap , if any between channels of both broadcasters,” he said.

“As per BARC data, Zee and Sony command a total Tv viewership share of approx 24%, which is tad higher than that of Star (20%); we believe there is a potential for this to move upwards and even breach levels of Star TV given the right strategy on content and distribution. Multiple synergies persist for the merged entity , if the merger goes through in the form of 1) ad price hikes 2) cost savings on content, marketing and employee front and 3) better bargaining power with distributors (higher share), which will lead to re-rating of valaution multiples on the TV segment,” said Taurani.