US cable major Comcast, which owns NBC Universal, Atairos, a $4-billion investment company led by former Comcast CFO Michael Angelakis, and Sony Corp have been shortlisted for talks that could lead to the purchase of a substantial stake in Zee Entertainment, multiple people aware of the situation said.
They are competing with technology giant Apple and Reliance Industries, the only homegrown contender. The shortlist happened in the past 10 days after the submission of non-binding bids by these firms. Comcast and Atairos may team up to form a consortium.
Chinese suitors Tencent and Alibaba, thought to be potentially strong contenders initially, have not yet made any offer.
“The due diligence is ongoing. Most of the negotiations, management meetings are happening offshore. Some of the discussions are more serious while others are waiting in the wings and keeping a close tab,” said an industry official on condition of anonymity.
“The April deadline is on track for now,” said the official. Binding offers are due after that.
A Zee spokesperson said it does not comment on speculation. “As communicated in its official statement, the stake sale process of ZEEL is in steady progress. “Any additional details cannot be shared at this stage, due to confidentiality agreements,” he added. Comcast and Sony declined to comment.
Mails sent to Atairos, Apple and Reliance did not generate a response till press time.
Sources said Sony seems keener to buy out the incumbent promoters upfront. Others such as Comcast, Atairos or an Apple – that lack significant local footprint in the fast growing local television and media entertainment — may initially explore an equal stake with the promoters but buy them out eventually after 3-5 years following the transition, allowing them to piggyback on any future upside as well.
The Zee management feels a foreign buyer, though allowed to own 100% in entertainment and media companies, would want a local partner and management team to run and navigate the complex, multilingual domestic market.
Zee Entertainment Enterprises had in November last year announced its promoters, led by Subhash Chandra, plan to sell up to 50% of stake to a strategic partner in order to deleverage their balance sheet.
Subsequently, the management has indicated it is open to selling over 50% of holdings in the firm as a part of asset monetisation efforts.
Zee shares have lost 23% in the last one year thereby partially impacting Subhash Chandra’s bargaining power to seek significant control premium. The current market cap is Rs 41,924.36 crore ($5.9 billion). The promoters own 41.62% of the company held through onshore and offshore entities. About 84.45% of the onshore stake is pledged with banks and financial institutions.
Local play
One of the early entrants into the satellite television space in India, Sony Pictures Networks India (SPN) has recently started aggressive expansion into different genres. A couple of years ago, it bought the sports business of Zee, housed under Taj Television (Ten Sports brand) for about Rs 2,400 crore. Last year, the company also entered Marathi general entertainment space.
The acquisition of Zee will make a lot of sense for SPN, which has more urban appeal and presence in only Hindi speaking markets. Zee, on the other hand, has a deeper connect with urban as well as regional markets and commands over 20% of overall television viewership.
Top Sony officials including Mike Hopkins, chairman of Sony Pictures Television, and Tony Vinciquerra, chairman of Sony Pictures Entertainment, had visited Subhash Chandra and his family at his residence shortly after Chandra announced his intent to sell half of the promoter holding in Zee to a global strategic investor.
The $84-billion Comcast, led by Brian Roberts, has been a serial buyer and seller of media assets including cable networks, broadband assets, content providers, internet providers and even animation studios since the late 1980s. It, however, lost out on 21st Century Fox after Walt Disney Co trumped their $65 billion bid last year. The company has been scouting for assets in India and other high growth markets.
Phonemaker Apple has been buying niche companies and startups to get access to cutting-edge technology, products and talent to push its own value-added offerings like music, content and entertainment and deepen user engagement. In mid-2017, it explored buying the entire content library of films and music of Eros International, but the billion-dollar valuation became a deal breaker.
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