The Board of Directors of Zee News Ltd (ZNL) has approved the proposed share swap ratio by Zee Entertainment Enterprises Ltd (ZEEL) for the de-merger of ZNL’s regional entertainment business (R-GEC) to ZEEL. The proposed de-merger would be funded by issuance of new shares by ZEEL to shareholders of ZNL and the share swap ratio has been proposed at 4 equity shares of Re 1 each of ZEEL for 19 equity shares of Re 1 each held in ZNL, as a consideration for the de-merger of the R-GEC business undertaking.
The Board of Directors of the Company had in an earlier meeting on October 23, 2009 granted ‘in-principle’ approval for the de-merger of the R-GEC business undertaking into ZEEL. In its meeting held on October 29, 2009, the Board considered and approved the Scheme of Arrangement between the ZEEL and ZNL under the provisions of Sections 391-394 of the Companies Act, 1956.
The process has been based on the valuation report submitted by independent valuer Grant Thornton India and a fairness opinion provided by Kotak Mahindra Capital Company Ltd. The appointed date for the Scheme of Arrangement will be January 1, 2010, and the scheme is subject to the necessary approvals from the stakeholders, creditors and regulatory authorities, including of the stock exchanges and the Bombay High Court.
Commenting on the de-merger, Subhash Chandra, Chairman, ZNL & ZEEL, in a prepared statement said, “We have taken proactive measures to unlock shareholder value in Zee News Ltd. The ZNL shareholders will also continue to take part in the divested assets through their holding in ZEEL. The demerger of the R-GEC business will lead to higher focus on the news operations of the company while Zee News Ltd continues on its path to become a news powerhouse in the times to come. We would be expanding our presence in the news media space in a big way in the times to come.”
On the acquisition, he added, “Zee Entertainment is already the leading provider of entertainment content across genres in the Hindi and English languages. With leading channels like Zee Marathi, Zee Bangla, Zee Telugu and Zee Kannada within its fold, Zee Entertainment would now have an unparalleled reach across the country in the fast growing regional markets. This acquisition also provides ZEEL the opportunity to take the regional channels international and expand revenue streams further. This move is part of our continuing efforts to improve long-term shareholder value.”
Punit Goenka, who has now been made ZEEL MD, said, “The reorganisation gives ZEEL a large growth opportunity and better control to exploit synergies across the entertainment spectrum. The benefits would accrue because of more effective cross pollination of ideas and better bundling of channels for selling. R-GEC will bring strength to the company’s operating performance from an already profitable business immediately accretive to revenues and operating profits.”
The de-merger of the R-GEC business includes six television channels (Zee Marathi, Zee Bangla, Zee Talkies, Zee Telugu, Zee Kannada and Zee Cinemalu), along with the assets and liabilities pertaining to these businesses. During FY09, the R-GEC business had a turnover of Rs 340.3 crore and an EBITDA of Rs 79.7 crore and capital employed of Rs 231.9 crore on March 31, 2009. During H1 FY10, the R-GEC business had a turnover of Rs 186.8 crore and an EBITDA of Rs 59.7 crore.
Post the acquisition and the issuance of new shares of ZEEL to ZNL, the effective paid-up capital of ZEEL would be Rs 484.4 million as compared to Rs 434 million earlier.