The merger's failure, reportedly because of disagreements
over who would lead the new entity, has also reignited worries over Zee's
ability to thrive in an increasingly competitive entertainment market.
Shares of India’s Zee Entertainment nosedived Tuesday after a
proposed $10 billion merger with the local unit of Japanese giant Sony was
called off.
The initial 30 percent plunge saw Zee lose as much as 55
billion rupees ($661 million) in market value. At least five brokerage firms,
including Hong Kong’s CLSA, have slapped a “sell” rating on the stock.
The merger’s failure, reportedly because of disagreements
over who would lead the new entity, has also reignited worries over Zee’s
ability to thrive in an increasingly competitive entertainment market.
The collapsed deal leaves both Sony and Zee more vulnerable
at a time when billionaire Mukesh Ambani-led Reliance Industries (RIL) is
negotiating a merger with Disney’s India unit, Bloomberg News reported.
India’s entertainment market, worth tens of billions of
dollars, is already one of the worlds biggest, while smartphone adoption is
forecast to expand further in the coming years.
Chairman and Managing Director of Reliance Industries, Indian
billionaire businessman Mukesh Ambani with his wife and Founder Chairperson of
the Reliance Foundation Nita Ambani poses for a photograph during the wedding
reception ceremony of actor Amir Khan’s daughter, Ira Khan, in Mumbai on
January 13, 2024. (Photo by SUJIT JAISWAL / AFP)
“Considering that Zee still has six billion rupees cash on
books… we see no bankruptcy risks,” Ambit Capital research analyst Vivekanand
Subbaraman wrote in a note.
“However, investors will find it very difficult to ascertain
the fair value of Zee given uncertainties on the operator,” Subbaraman added,
pointing to issues including the debate on whether CEO Punit Goenka will remain
at the helm
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