Sony Group unit seeks to acquire India's Zee Entertainment, invest an additional $1.57 billion

Sony Pictures Networks India said on Wednesday it has agreed to acquire Zee Entertainment, which, if the deal materializes, will bring together two of the largest broadcasting giants in India that run large cable television networks, streaming services, music labels, and own scores of other digital assets.

The subsidiary of the Japanese conglomerate group said it will invest $1.575 billion in Zee Entertainment, a 30-year-old firm that has been grappling with internal governance issues.

Sony said it wants to acquire a controlling 53% stake in the publicly listed Zee Entertainment, but did not disclose how much it plans to spend on buying Zee, which operates over five dozen TV channels in English, Hindi, and many regional languages and has tie-ups with several global studios for broadcasting and streaming their library in India. Sony Pictures Networks India, similarly, operates over two dozen TV channels in the South Asian market.

A merger would help the two firms regain market share in the country, where the television landscape has significantly changed in the past two decades -- thanks to the arrival of new players and dramatically fast internet adoption.

Both Zee and Sony have been important fixtures in the Indian TV industry for the last 25 years. Sony launched Sony Entertainment Television in India in 1995 and has aired some of the most memorable shows including "Indian Idol," and "Kaun Banega Crorepati," an official Hindi adaptation of "Who Wants to be a Millionaire?"

The firms also operate on-demand streaming services such as Zee5 and SonyLiv that compete with dozens of other players including Netflix, Amazon Prime Video and Disney's Hotstar. Zee5 and SonyLiv both together amassed over 150 million monthly active users -- though there is likely a considerable overlap between their user bases.

The two firms said that over the next 90 days they will conduct due diligence and finalize a definitive agreement. Analysts say that Zee will need a majority approval from its shareholders for the deal to go through.

In a filing to BSE, the publicly listed Zee Entertainment said the proposed merged entity will be led by current Zee chief executive Punit Goenka (pictured above). Several Zee shareholders have asked for the termination of Goenka and other top officials in recent days.

Zee’s shares surged 35% on the news Wednesday, giving it a market value of $4.5 billion.

“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,” Sony Pictures Networks India said in a statement. “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.”