India's largest publicly-traded television network Zee Entertainment Enterprises will merge with Sony Pictures Network India (SPNI), capping days of high drama during which the firm's shareholders sought removal of key officials.

Sony, which will invest USD 1.575 billion, will hold 52.93 per cent stake in the merged entity and Zee the remaining 47.07, Zee Entertainment Enterprises (ZEEL) said in a statement.

In recent days, Zee has seen its top investor seek a management reshuffle, including the exit of chief executive Punit Goenka.

A majority of the merged company's board would be nominated by Sony, while Goenka would lead it, according to the terms of the deal.

Invesco Developing Markets Fund and OFI Global China Fund LLC, which together hold about 17.9 per cent stake in Zee, had sought an extraordinary general meeting of shareholders last week to oust Goenka along with two board members.

The move was seen as an attempt to end the sway of founder Subhash Chandra's family over the company founded in 1992.

While the deal may take some pressure off Zee, it will help expand Sony's media business in India.

In an exchange filing, Zee said it has entered into a non-binding term sheet with SPNI to bring together their linear networks, digital assets, production operations and programme libraries.

The combined entity will own over 70 TV channels, 2 video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India) making it the largest entertainment network in India.

Its nearest rival would be now Star and Disney in the Indian market.

"The merger of ZEEL and SPNI would bring together two leading Indian media network businesses, benefitting consumers throughout India across content genres, from film to sports. The combined company is expected to benefit all stakeholders given strong synergies between ZEEL and SPNI," said SPNI in a statement.

While in a separate statement ZEEL said, its board in a meeting held on Tuesday unanimously provided an in-principle approval for the merger between SPNI and the company.

"The board concluded that the merger will be in the best interest of all the shareholders and stakeholders. The merger is in line with ZEEL's strategy of achieving higher growth and profitability as a leading media and entertainment company across South Asia," it said.

According to ZEEL, "With this corporate development, the merged entity will result into an accelerated growth and a significant opportunity to create tremendous value for all its stakeholders."

"The term sheet provides an exclusive period of 90 days during which ZEEL and SPNI will conduct mutual diligence and finalise definitive agreement(s)," said SPNI.

The non-binding term sheet provides an exclusive negotiation period of 90 days during which ZEEL and SPNI will conduct mutual diligence and negotiate definitive, binding agreements.

"The combined company would be a publicly listed company in India and be better positioned to lead the consumer transition from traditional pay TV into the digital future," said SPNI.

According to ZEEL, the final transaction would be subject to completion of customary due diligence, negotiation, and execution of definitive binding agreements, and required corporate, regulatory and third-party approvals, including approval from its shareholder.

Moreover, as per the deal, the promoter Subhash Chandra family is free to increase its shareholding from the current 4 per cent to up to 20 per cent.

Chandra, a rice trader-turned-media mogul, and his family had brought down their stake in Zee to help pare debt at their broader Essel Group.

"According to the term sheet, the promoter family is free to increase its shareholding from the current 4 per cent to up to 20 per cent, in a manner that is in accordance with applicable law. Majority of the board of directors of the merged entity will be nominated by Sony Group," said ZEEL.

Moreover, Sony Pictures Entertainment, the parent company of SPNI, would invest growth capital of USD 1.575 billion.

This is "to enhance the combined company's digital platforms across technology and content, ability to bid for broadcasting rights in the fast-growing sports landscape and pursue other growth opportunities," said SPNI.

"Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25 per cent in favour of ZEEL.

"However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07 per cent of the merged entity to be held by ZEEL shareholders and the balance 52.93 per cent of the merged entity to be held by SPNI shareholders," the ZEEL statement said.

SPNI is an indirect wholly-owned subsidiary of Sony Group Corporation, Japan.

ZEEL Chairman R Gopalan said: "The value of the merged entity and the immense synergies drawn between both the conglomerates will not only boost business growth but will also enable shareholders to benefit from its future successes.

As per legal and regulatory guidelines, at the required stage, the proposal will be presented to the shareholders of ZEEL for their approval.

Zee shares zoomed 25 per cent to Rs 319.50 their 52-week high of on BSE.