Zee bids time on the Sony deal as two directors voted against it

Zee Entertainment Enterprises Ltd has asked Sony Pictures Networks India for more time to complete their $10 billion merger, even as the country’s largest listed entertainment company is witnessing growing jitters among investors. The re-appointment of two independent directors was rejected while a third withdrew its candidacy ahead of the annual general meeting (AGM) last week.

Zee did not share any details in its announcement to the stock exchanges on Sunday, including why it sought more time. It is also unclear whether Sony will agree to this demand from the Subhash Chandra-founded company.

On Saturday, Zee informed the stock exchanges that two resolutions to reappoint independent directors Vivek Mehra and Sasha Mirchandani were rejected as the proposals did not receive the approval of 75% of the shareholders, which is required for special resolutions. And the reappointment of Adesh Kumar Gupta, another independent director, fell through after he withdrew his candidature on December 13, three days before the AGM, citing personal reasons.

While 52% of shareholders voted against Mehra’s reappointment, about 29% voted against Mirchandani’s reappointment. It comes after investors rejected the reappointment in July of another independent director, Alicia Yee, a partner at executive search firm Korn Ferry.

Significantly, the vote result comes as the closing of the Zee-Sony merger looks certain to be extended beyond the earlier announced December 21 deadline.

The head of a proxy advisory firm said the vote reflected nervousness among minority investors about whether the merger would succeed. “Investors probably believe that the merger may fail and do not want the current board members to continue with standalone Zee as they feel they have failed to close the merger,” the executive said on condition of anonymity.

Zee declined Mint’s request for comment.

Some of the largest foreign institutional investors, who together own a third of Zee, voted against the resolutions. In comparison, the promoters only own a 3.99% stake in the company.

The City of New York Group Trust, which owns 1.3% of Zee, has voted against Mehra’s reappointment, according to documents reviewed by Mint. Legal and General Investment Management (LGIM), the UK’s largest fund manager, also voted against Mehra’s bid. “A vote against is applied as LGIM expects a CEO/CFO/Director or Non-Executive Director not to take on too many external roles to ensure they can carry out their duties effectively,” reasons LGIM.

Mehra, a Chartered Accountant and former partner and managing director at PricewaterhouseCoopers Pvt. Ltd, is on the board of seven registered companies and a real estate investment trust.

The California Public Employees’ Retirement System (CalPERS), which manages about $500 billion in assets, also rejected Mehra’s application. And APG Asset Management, a Dutch group that manages about $600 billion in assets, voted against reappointing both Mehra and Mirchandani.

At least two proxy advisory firms, including Institutional Investor Advisory Services (IiAS) and Stakeholders Empowerment Services, recommended voting against Mehra’s reappointment.

IiAS also recommended shareholders not to give Mirchandani a second term.

On Mirchandani, IiAS noted that as a member of the Nomination and Remuneration Committee, he was responsible for the jump in the remuneration of Zee Managing Director and CEO Punit Goenka, which rose from 13.2 crore in FY21 to 41.1 crore in FY22, outpacing the company’s 21% growth in profit over the same period. It is further stated that Goenka’s 35 crore salary in FY23 was high, representing 2% of profit before extraordinary items.

“The entire board of Zee will undergo a revamp after the Sony merger and control will shift to Sony. An entirely new set of directors will be appointed,” said Sriram Subramanian, founder and managing director of InGovern Research Services, a Bengaluru-based proxy consultancy. Subramanian saw no problem with the reappointment of the two directors.

At Dish TV India Ltd, the company owned by Chandra’s younger brother Jawahar Goyal, nine directors have been ousted by investors since Yes Bank blew off an investor revolt in September 2021.

That means a dozen director nominations have been rejected by shareholders of Chandra-owned companies in the past 30 months. During this time, three independent directors stepped down to continue on Zee’s board. In addition to Gupta (last week), in September 2021, Ashok Kurien and Manish Chokhani resigned a day before the AGM.

So far, Zee’s three-member board, which does not include founder Chandra, has appointed Venakata Ramana Murthy Pinisetti, Uttam Agarwal and Shishir Desai as independent directors.

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