Zee Entertainment Enterprises Ltd has requested additional time from Sony Pictures Networks India to complete their $10 billion merger despite experiencing growing dissatisfaction among investors as the nation’s largest publicly traded entertainment company. Last week, the AGM rejected the reappointment of two independent directors, while a third director withdrew his bid.
Zee should have included information in its communication to the stock markets on Sunday, including the reason for requesting an extension. It is also still being determined whether Sony will accept this request from the company created by Subhash Chandra.
On Saturday, Zee notified the stock markets that two resolutions to reappoint independent directors Vivek Mehra and Sasha Mirchandani were unsuccessful as they needed to receive consent from 75% of shareholders, which is required for extraordinary resolutions. The reappointment of Adesh Kumar Gupta, another independent director, was unsuccessful as he withdrew his bid on 13 December, three days before the AGM, due to personal reasons.
Around 52% of shareholders voted against Mehra’s reappointment, while approximately 29% voted against Mirchandani’s. This follows investors’ rejection in July of the reappointment of another independent director, Alicia Yi, a partner at the executive search firm Korn Ferry.
Notably, the voting result comes when the completion of the merger between Zee and Sony will likely be delayed beyond 21 December.
The leader of a proxy consulting company stated that the voting indicates the apprehension of minority shareholders regarding the merger’s success. “Investors likely think that the merger might not happen and do not want the current board members to remain in charge of standalone Zee, as they believe the board members have not completed the merger,” the executive added anonymously.
Several prominent overseas institutional investors, who collectively possess one-third of Zee, voted against the resolutions. On the other hand, the promoters only possess a 3.99% share in the corporation.The City of New York Group Trust, which owns 1.3% of Zee, opposed the reappointment of Mehra, as per records accessed by Mint. Legal and General Investment Management (LGIM), the largest fund manager in the UK, also voted against Mehra’s nomination. “LGIM reasoned that a vote against is applied when they expect a CEO/CFO/FD or a non-executive director not to have excessive external roles, to ensure their ability to perform their duties effectively,” explained LGIM.
Mehra is an accountant with professional certification and previous experience as a partner and executive director at PricewaterhouseCoopers Pvt. Ltd is on the board of seven publicly traded firms and a real estate investment trust.
The California Public Employees’ Retirement System (CalPERS), which manages around $500 billion in assets, likewise declined Mehra’s nomination. APG Asset Management, a Dutch company that oversees around $600 billion in assets, opposed the reappointment of both Mehra and Mirchandani.
Two proxy advice firms, namely Institutional Investor Advice Services (IiAS) and Stakeholders Empowerment Services, have suggested voting against the reappointment of Mehra.
IiAS also advised shareholders against granting a second term to Mirchandani.
IiAS observed that Mirchandani, as a member of the nomination and remuneration committee, increased Zee’s and managing director Punit Goenka’s remuneration. Goenka’s remuneration rose from 13.2 crore in FY21 to 41.1 crore in FY22, surpassing the company’s 21% profit growth. The report also mentioned that Goenka’s remuneration of ₹35 crore in FY23 was significant, representing 2% of the profit before unusual items.
The entire Zee board will be refreshed following the merger with Sony, with control transferring to Sony. “A completely different group of directors will be appointed,” stated Shriram Subramanian, the founder and managing director of InGovern Research Services, a proxy advisory firm based in Bengaluru. Subramanian had no concerns 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 removed by investors since Yes Bank initiated an investor rebellion in September 2021.
This indicates that shareholders of firms owned by Chandra have rejected the candidatures of twelve directors over the past thirty months. Now, three formerly independent directors have decided to step down from their positions on Zee’s board. Apart from Gupta (last week), Ashok Kurien and Manish Chokhani resigned the day before the AGM in September 2021.
Zee’s board, excluding founder Chandra, has selected Venakata Ramana Murthy Pinisetti, Uttam Agarwal, and Shishir Desai as independent directors.