What according to Reliance was the reason for the Zee deal not going through?

According to Reliance Industries, the differences between Zee managing director, Punit Goenka, and Invesco Fund had led to a collapse of the merger talks. Reliance had shown interest in Zee Entertainment to add to its already existing media portfolio. In fact, Invesco Fund had syndicated the deal and got Reliance and Zee on the negotiating table. However, RIL was not interested in being pulled into a situation where there was no consensus.

Currently, there is a cold war on between Invesco, which owns 17.88% in Zee Entertainment and the CEO Punit Goenka who represents the Subhash Chandra family. Invesco is seeking to recast the board of Zee and oust Goenka, the son of Subhash Chandra, but the Zee board has refused to call an EGM. While Zee has challenged Invesco’s attempt to restructure the board in courts, the matter is currently stuck in the NCLT and final verdict is awaited.

According to Reliance, the differences between Goenka and Invesco arose over Zee’s founding family seeking to increase its stake by subscribing to preferential warrants. However, Invesco felt that the founders could always increase their stake through market purchases. At that point, RIL had wanted to control 60% of the merged entity by investing Rs.14,000 crore. However, the moot question is why it was disclosed to Zee board.

The deal with Reliance was being negotiated by Punit Goenka and Subhash Chandra and apparently, Reliance had agreed to give up to 8% equity in the merged company to the Subhash Chandra family. Proxy advisors are worried that in the Reliance merger and the Sony merger, the 78% shareholders other than Invesco and Chandra lose out. Even in the Sony case, the 2% non-compete fee has come under scrutiny.