August 2022
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Zee-Invesco boardroom fight turns murkier, Zee claims Invesco offered dubious deal that could have caused shareholders Rs 10k crore loss
New Delhi, The fight between Zee Entertainment Enterprises Ltd (ZEEL) and its shareholder Invesco is getting murkier by the day.
A day after Invesco released an open letter to shareholders raising governance issues and leadership failures, Zee Entertainment Enterprises on Tuesday claimed that Invesco had in February proposed a deal that could have caused shareholders a loss of at least Rs 10,000 crore.
ZEEL MD and CEO Punit Goenka in a note to company board said that the deal was presented by Invesco representatives Aroon Balani and Bhavtosh Vajpayee involving the merger of the company and certain entities owned by a large Indian group (Strategic Group).
As per the deal presented to Punit Goenka, the note said, upon completion of the aforesaid merger, the Strategic Group would have held a majority stake in the merged entity Punit Goenka would have been appointed as the MD & CEO of the merged entity.
"Punit Goenka expressed his apprehension to Invesco that as the merging entities of the Strategic Group were over-valued, it would result in a loss to the stakeholders of the company," as per the note presented to the Board.
It has been claimed that Invesco told Punit Goenka that the valuations of the entities belonging to the Strategic Group had been unilaterally "agreed" by Invesco.
Further, there was no room for further negotiations on the commercial terms of the deal and no data would be forthcoming to diligence and verify the valuation being attributed to the entities belonging to the Strategic Group, the company said in its filing to stock exchange BSE.
The company's management team informed the board that in their considered view, the valuation attributed to the entities belonging to the Strategic Group could have been inflated by at least Rs 10,000 crores.
"This would mean that if the proposed deal would have been approved, the shareholders of the company would have suffered a loss of at least Rs 10,000 crores," the company said.
"When Mr Punit Goenka expressed governance concerns in relation to the deal (especially surrounding the valuation gaps in the merging entities of the Strategic Group)' he was informed by Invesco that the deal would be consummated with or without him, even though Invesco believed that he was best suited to lead the merged entity and his absence would erode shareholder value," according to company.
The proposed deal offered the promoter group 3.99 per cent shareholding of the merged entity and Goenka was further offered employee stock options (with no vesting conditions), representing about 4 per cent of the shareholding of the merged entity.
"Accordingly, the existing promoter group of the company along with Mr. Goenka would have held up to 7-8 per cent in the merged entity," said the company referring to the board note from Goenka.

It said that the company board in its meeting on October 12 also took note of the open letter issued by Justin M. Leverenz, the Chief Investment Officer of Invesco Developing Markets Equities, on behalf of Invesco (open letter).
"The Board will separately respond to certain unjustified comments made in the Open Letter," Zee said.
"Accordingly, the board is constrained to conclude that Invesco's actions over the past few weeks, have been motivated by circumstances that are extraneous to the company's business or performance, or issues of corporate governance or public interest," the BSE filing noted.
Invesco in its open letter to shareholders on Monday had resolved to rejig the Zee board and remove Punit Goenka from the post of CEO and MD. Invesco is the largest shareholder in ZEEL with an ownership interest of 18 per cent.

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