The Essel group is selling 11 per cent of its stake in broadcaster Zee Entertainment Enterprises Ltd (ZEEL) to Invesco Oppenheimer for Rs 4,224 crore.
The transaction will ease the huge debt burden of the promoters who owe close to Rs 11,000 crore to lenders against pledged shares.
The group, led by Subhash Chandra, is now looking to sell some of its non-media assets (solar and road) and an additional stake in Zee to repay the entire amount.
The deal values Zee Entertainment at Rs 38,400 crore, which translates into a per share price of Rs 400, a premium of around 11 per cent to the closing price of the company on the BSE on Wednesday.
The market has been eagerly awaiting this deal though the stock could not hold on to its gains on Wednesday and closed 5.18 per cent down at Rs 361.45.
Atlanta-based Invesco Oppenheimer’s Developing Markets Fund, which already owns 7.74 per cent in ZEEL, will pick up the fresh stake. The global fund house has been a financial investor in Zee since 2002.
The promoters, who since last November have been trying to pare their stake by half, own 35.79 per cent in ZEEL as of June 2019, of which 63.98 per cent have been pledged with mutual funds and other financial institutions. Following this transaction, the promoters’ stake will come down to around 23 percent.
Essel Group has started divesting its key assets to repay all the lenders by September 2019.
A statement said the group had received a positive response from multiple partners who are interested in buying its stake in Zee and other key non-media assets.
According to the firm, the announcement of an 11 per cent stake sale in ZEEL to the fund is a strong step in the overall divestment process and it gives the promoters the required financial fillip to initiate the repayment process.
Speaking to analysts at a conference call, Punit Goenka, managing director and CEO of ZEEL, said the group was confident of repaying the lenders within the agreed timeline.
While there have been reports of a consortium, including Comcast and others such as Reliance Jio and Sony, expressing their keenness to acquire the stake, Goenka said the preference was given to a financial investor over a strategic investor as it will allow Chandra to remain in charge of the firm.
Goenka added that the tax liability emerging from the transaction would be very small.
According to Goenka, while the transaction with Oppenheimer is a pure equity deal, there will be no board seat for the buyer and that no conditions of any lock-in has been set. “The priority for the family is to retire the entire loan against shares and that takes precedence over what we choose to do,’’ he said.
