Invesco deal better as it meets my timelines: ZEEL's Punit Goenka

Punit Goenka
Punit Goenka sounds relieved as the process of divesting promoter stake in the Rs 7,933-cr Zee Entertainment Enterprises is finally over. Soon after the deal was finalised, he spoke to Vanita Kohli-Khandekar. Edited excerpts:

Why Invesco?

There were several options (He refuses to discuss the details of these). But this was a pure-play equity deal. Also, we had an existing relationship with Oppenheimer (which Invesco bought in 2018) for 17 years. They own 8 per cent in Zee. This takes their holding to 19 per cent. I have known Justin Leverenz (portfolio manager, Invesco Oppenheimer Developing Markets Fund) personally. And this deal happened over a casual conversation during a general investor meeting a month and a half back. 

What does Invesco bring? How do things change for Zee?

Nothing changes for the company. Invesco is a pure financial equity investor. They have no rights other than those of a shareholder; they have no board seat. The agreement does not restrict Zee; we don’t have to go to them for permissions except for approvals required from shareholders under regulation. 

It is very disappointing to hear that the buyer is not a strategic investor like the consortium led by Comcast… How was this deal better? 

We would have liked it to be Comcast too but this is a better deal because it was meeting my timelines. Comcast was taking much longer to complete the deal; it would have gone beyond the deadline of September 30.

Wouldn’t the consortium led by Comcast (containing among others a fund set up by James Murdoch) have been a better fit strategically…

It would have certainly been better. But we waited for them. We could have announced the Invesco deal on the day of the results (July 23), but we waited an additional five days for Comcast. 

For many months Zee has been saying that the stake sale is also intended to get in a strategic investor and take the company global… did the promoter debt and the deadline then mean that you were negotiating from a position of weakness? Because this brings nothing to the company… not even the money.

Absolutely. If we had more time we could have done that (got in a strategic investor). But since the black Friday in January (when the Zee stock crashed by over 30 per cent) we have been fighting. And my conjecture is that strategic investors were looking for a bargain. They were not willing to pay for the intrinsic value of the asset (that is over and above the market price of Rs 360 per share). Zee is not worth Rs 400 (per share), it is more than that. If Star was valued at $16 billion (in the Disney-Fox deal) then how can Zee be only $5.5billion (Rs 40,000 crore)? Our peak share price was Rs 630. That gives Zee a valuation of Rs 60,000 crore or about $9 billion. Finally it was only Oppenheimer which knew the intrinsic value of this asset. They have known us for 17 years. It gave a premium over the market because it knows that once our pressure is over, this asset will give returns. 

What does this mean for the debt reduction at the group level?

Of the promoter’s 36 per cent stake in Zee, 11 per cent goes to Invesco. The remaining 25 per cent remains with the investors. As of date the total debt stands at Rs 11,000 crore. With this stake sale and the sale of non-media assets (roads and solar) already under due diligence the debt will be cleared.

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