The ongoing boardroom battle between Zee Entertainment Enterprises Ltd (ZEEL) and Invesco over convening an extraordinary general meeting (EGM) to remove the company's MD and CEO and other directors has taken a fresh twist with the ZEEL board on Tuesday considering a note from the company's MD and CEO, Punit Goenka, which talks about another merger deal pushed by its largest overseas shareholder that would have robbed the shareholders of at least Rs 10,000 crore.
The revelation made by Goenka in the board note comes just a day after Invesco had issued an open letter to the shareholders of ZEEL, highlighting serious governance issues in the company and the need to restore the board's independence.
The open letter also accused the ZEEL management of enriching the promoter family in its merger deal with Sony Pictures.
According to the board note presented by Goenka, a deal was presented by Aroon Balani and Bhavtosh Vajpayee, representatives of Invesco, to him in February 2021 involving the merger of the Company and certain entities owned by a large Indian group (Strategic Group).
As per the deal presented to Goenka, upon completion of the aforesaid merger, the Strategic Group would have held a majority stake in the merged entity and Punit Goenka would have been appointed as the MD and CEO of the merged entity.
The note mentioned that Goenka had 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, to which Invesco had replied that valuations in the deal were unilaterally "agreed" by it and there was no room for further negotiations on the commercial terms of the deal and no data would be forthcoming to verify the valuation being attributed to the entities belonging to the Strategic Group.
Goenka said in the note that the company's management team had 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 crore. This would mean that had the proposed deal been approved, the shareholders of the company would have suffered a loss of Rs 10,000 crore.
What is interesting is that the board note says that the promoter family and Goenka were offered 4 per cent holding in the merged entity as per Invesco's offer, while another 4 per cent would have been given through employee stock ownership plan (ESOP).
This offer by Invesco runs contrary to the claims it had made in the open letter where it had accused the current ZEEL management on its merger deal with Sony Pictures, suggesting that it would gift a 2 per cent equity stake to the promoters of Zee in the guise of a "non-compete, and also enrich the promoter family with rights to raise their stake from 4 per cent to 20 per cent".
"Invesco's stance in its open letter that it "will firmly oppose any strategic deal structure that unfairly rewards select shareholders, such as the promoter family, at the expense of ordinary shareholders" runs contrary to the very deal Invesco was proposing itself a few months ago. Accordingly, the public securities markets have been misinformed by Invesco," the board note shared with bourses said.
The note also indicated that Invesco made it clear that it would go ahead with its proposed merger plan with or without Goenka when he raised serious governance issues about the deal.
The ZEEL board also took note of an open letter issued by Invesco earlier in October through Justin M. Leverenz, it's Chief Investment Officer, and decided to separately respond to certain unjustified comments made in the open letter at a later stage.
"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 note said.