Many have assumed that Invesco is going to be happy that Sony wants to come aboard Zee and infuse more capital and will have 53% stake. It worked well for Invesco as investors and the way the stock price responded seemed to indicate that shareholders were largely happy. But Invesco is going ahead with the EGM seeking removal of Punit Goenka.Invesco is not opposed to the merger between Zee and Sony. What they are saying is that the governance structure needs to be in place and to ensure that once the governance structure is in place, one has to have a board which is relatively independent and the decisions which have been made are made in the interest of all stakeholders.
Essentially, the argument is that while there is an announcement saying that there is a merger with Sony and the deal contours are that there is a non-compete feature, Punit Goenka remains on the board as Managing Director. The question we have to ask is what Invesco is asking is could there have been a better deal structure in the absence of Punit Goenka? If there is an independent board, which is more mindful of all stakeholders, are we likely to get a better deal out of the entire structure or a better valuation or are there other people who could bring in more investment into the business or find a better partner?
These are the open questions. I do not think the entire perspective of wanting the removal of Punit Goenka is linked to them not liking the Sony Zee deal. It would have been better if the governance structure were in place and that is Invesco’s point.
At the heart of it, it is the story of a promoter family wanting to hold on to their position in a company that they have built up and they do not want the white knight of 2018 who saved them to turn upon them.
Governance starts when compliance ends and therefore the right thing for the board to have done proactively was to look at what the investors want. Mind you, this is an 18% shareholder with a market of Rs 5,000 crore at stake, who is asking for the removal of a Managing Director. Therefore, the board has to be far more proactive in their communication and should address this issue more quickly. Silence is possibly taking it a bit too far.
They have another 45 days in which Invesco can hold the AGM. This is a US-based fund. It is not going to look at trying to breach through 2.5 lakh investors and organise this EGM. It is essentially the responsibility of the board to organise the EGM and should the board fail, it becomes the investors’ responsibility. But the board cannot simply say wait and let the time slide by.
Coming to the whole transaction and whether this is really a survival mechanism for the managing director, from Sony’s point of view, with the merger I am taking out a competitor. The ad revenues go up, I get more eyeballs and so it is a great deal right. The due diligence has not been done and therefore it is all debatable in terms of what the balance sheet will finally end up to be. But Sony is a large multinational company and for them to take over a competitor which is almost equal in size for the continuity of one individual, doesn’t sound right.
If one says that the current MD is the only one who understands the media business, I would argue that Sony has equal and more competence in that. So the argument to say that the entire transaction is going to be for Goenka to continue is too stretched an argument.
