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Who’s buying Subhash Chandra’s Zee Entertainment?

What do you do when the economy is failing, your earnings are not up to the mark, lenders are chasing you for money and the banks won’t lend you another dime?

You sell stake. What else can you do?

A similar fate as mentioned above has befallen on India’s most storied media empire, Zee Entertainment. The Subhash Chandra led conglomerate is trapped under a mountain of debt in excess of ₹ 13,000 crores and is railing under the effects of lackluster earnings coupled with banks, mutual funds and other investors demanding their money back. The situation got so dire that Mr. Chandra and his family had to pledge shares with lenders to give them some sort of guarantee. After the value of the shares began to fall, some lenders sold shares in the open market, and the promoters, who, till last year held in excess of 40% stake, now have close to 36% stake remaining. Subhash Chandra has come to an agreement with the remaining lenders who consented not to sell further shares till September; but time is running out. Mr. Chandra’s other group entities such as Essel Infrastructure’s road and solar assets have also been put up on the block for sale to help the situation.

It is against this backdrop that the billionaire has agreed to sell a substantial stake in his flagship company, Zee Entertainment, to raise money to pay back lenders.

Zee has received two offers for the proposed stake sale.

The first one comes from a consortium that includes US cable giant Comcast, James Murdoch’s Lupa Systems and Private Equity firm Blackstone Group. This offer is non-binding in nature and negotiations are believed to be on for acquiring a controlling 51% stake in Zee, which as per today’s share price, totals somewhere in the range of ₹ 35,000 crores. However, according to reports, the promoters of Zee are bargaining for an offer price of close to 17-20% premium over the last six months average share price, which would give them a much better deal.

The $ 84 billion giant, Comcast, has been a serial buyer of media assets including cable networks, broadband assets, content providers, internet providers and animation studios since the 1980s. Accordingly, an acquisition of India’s largest private broadcaster with its deep library of content, platforms offering Bollywood films, and more than 90 TV channels across 12 languages on demand via internet, would definitely be a feather in its cap.

The second offer is a binding offer from an unknown Asian investor group for a partial stake sale, which would allow Subhash Chandra and MD & CEO Punit Goenka to retain control of their company. Zee is expecting a similar valuation in this deal as well i.e. at 17 to 20% premium over the last six months average share price.

While no details of the proposed deals are in public domain as yet, talks are believed to be in advanced stages.


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