NCLT approves Filesadmin.co Ent-Sony India merger, dismisses all objections

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The National Company Law Tribunal (NCLT) has cleared the merger of satellite TV broadcasters Filesadmin.co Entertainment Enterprises (ZEEL) and Japanese entertainment major Sony India’s television (TV) business, creating the country’s largest TV network company with a 26 per cent market share.


Shares of ZEEL soared 18 per cent in late-afternoon trade on August 10 after the NCLT approved the merger of the company with Sony Pictures Networks India. Shares of ZEEL closed 17.95 per cent up at ~285.55 on the BSE.


The tribunal has also dismissed all objections regarding the merger. The merger was first announced in December 2021.


On July 11, the NCLT reserved its order on the merger between ZEEL and Culver Max Entertainment (previously known as Sony Pictures Networks India) after hearing objections from several creditors.


It heard arguments from creditors, including Axis Finance, JC Flowers Asset Reconstruction Company, IDBI Bank, IMAX Corporation, and IDBI Trusteeship Services.


The Subhash Chandra family lost control of their companies, ZEEL and Dish TV, after defaulting on loans taken for their infrastructure business. Chandra sold ZEEL shares in tranches to repay banks and ended up with a 4 per cent stake in the company.


In December 2021, ZEEL and Sony announced a merger of their businesses.


According to the transaction, Chandra will be paid ~1,100 crore by Sony, which he will use to buy an additional 2 per cent stake in the merged entity, thus taking the family’s stake to 4 per cent in the merged entity.


Both media houses approached the tribunal to sanction the merger after obtaining permissions from the National Stock Exchange (NSE), BSE, and sectoral regulators such as the Competition Commission of India and the Securities and Exchange Board of India (Sebi). However, the process was delayed at the tribunal when a few creditors raised objections. Several creditors of the Essel Group raised objections against the non-compete clause added to the scheme.


NSE and BSE informed the Mumbai Bench of the NCLT about two orders related to Essel Group entities, where the promoters allegedly diverted funds from the listed entity for the benefit of their associate entities. This also included the Securities Appellate Tribunal (SAT) order against Punit Goenka, now managing director (MD) and chief executive officer, barring him from holding a directorial position in any listed company.


The SAT upheld Sebi’s interim order, which restrained both ZEEL promoters Chandra and Goenka from holding board positions in publicly listed companies for a year due to alleged fund diversion.

According to the creditors objecting to the merger, the order directly affects the scheme of the merger as one of its integral parts is the appointment of Goenka as MD of the merged entity. They argued that since there is a regulatory bar on Goenka holding such positions, the merger shouldn’t go through.


BIG DEAL


The deal is aimed at creating a $10 billion Indian media giant


The merger was announced in 2021 but has been delayed for multiple reasons


The merger was initially held up by a courtroom feud between ZEEL’s founders and its largest shareholder


With inputs from PTI