(Below is Elara Securities' Karan Taurani's perspective on the settling of the dispute between Zee and Sony)
Mumbai: The above development (settlement by Sony and not imposing a $ 90 mn termination fee to Zee) has no material impact in terms of earnings estimates as this case was a status quo with regulators. We had not factored any adverse impact of the case (Sony Zee merger termination) in our earnings estimates. However, this is seen as a clear respite to ZEEL’s core broadcasting business, which is trading at compelling valuations of seven times to one-year forward PE and has the potential to move towards our target multiple of 11 times PE core broadcasting business.
We continue to maintain our positive stance on ZEEL, as we expect better growth rates in the festive season (Q3FY25), led by higher ad spends within FMCG verticals; further profitability too will continue to improve helped by cost-cutting initiatives, improved efficiencies, and lower losses in ZEE5, which will drive valuation re-rating. We have a BUY rating on ZEEL with a TP of Rs 210.
Enclosed below is the link to the last update on Zee: https://tinyurl.com/54updv7x
Highlights
- In an update to the stock exchange, Zee and Sony Pictures India (CMEPL and BEPL) have entered into a settlement to withdraw applications pending lawsuits, claims and counterclaims including a $ 90 mn termination fee, damages etc.
- The agreements include a) Settlement for all ongoing disputes, b) Withdraw all applications, claims and counterclaims against each other (including a $ 90 mn termination fee), and c) Releasing each other from all claims regarding the transaction documents.
- The parties have agreed to withdraw all pending applications, claims, and counterclaims filed before the Singapore International Arbitration Centre (SIAC)
- On 22 Jan 2024, Sony terminated the merger cooperation agreement, and the composite scheme of arrangement originally signed on 22 Dec 2021. Sony immediately sought $ 90 mn in termination fees by filing an appeal with the Singapore International Arbitration Centre (SIAC).
- The merger was primarily called off due to a dispute on the leadership of the merged entity.
- The ZEEL had also filed case against Sony India seeking a $ 90 mn termination fee
