After a roller-coaster ride of two years, media houses ZEE and Sony are all set to amalgamate into a $10-billion media powerhouse as the National Company Law Tribunal (NCLT) on Thursday gave its approval to the merger, dismissing all objections raised by the lenders.

Just a few hours after the tribunal bench, headed by HV Subba Rao and Madhu Sinha, cleared the decks for the merger, Zee Entertainment Enterprises Ltd (ZEEL) shares soared to a 52-week high of 18%, up at Rs 285.55.

Informing the Bombay Stock Exchange, ZEEL said, “We wish to inform you that the National Company Law Tribunal, Mumbai Bench, has approved the composite scheme of arrangement amongst Zee Entertainment Enterprises Limited, Bangla Entertainment Private Limited and Culver Max Entertainment Private Limited (formerly known as Sony Pictures Networks India Private Limited). The final order copy is awaited. This is for your information and records.”

With this merger, ZEE and Sony will have an audience of over 700 million people in its television and digital verticals, which will enhance their market presence and give them a bigger slice of the advertising pie.

According to industry experts, the merged companies will own over 70 TV channels, two video streaming platforms – ZEE5 and Sony LIV – and film studios – ZEE Studios and Sony Pictures Films India – with a market share of 26%.

The journey of the merger began in December 2021 with ZEEL’s Board of Directors considering and approving the Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013 (Scheme), whereby the Company and Bangla Entertainment Private Limited, an affiliate of Culver Max Entertainment Pvt Ltd (formerly known as Sony Pictures Networks India Private Limited), shall merge in Culver Max Entertainment Pvt Ltd.

After getting the requisite approvals and NOCs from shareholders and certain regulators, including SEBI and the Competition Commission of India (CCI), the company filed a petition with NCLT for approval of the scheme.

On July 11, the tribunal had reserved its order on the merger following hearing objections from several creditors, including Axis Finance, JC Flower Asset Reconstruction Co., IDBI Bank, IDBI Trusteeship and Imax Corp.

In its recent financial statement that came out just a day before the NCLT order, ZEEL said its management, as part of its portfolio rationalisation initiative and conditions of the impending merger, is in the process of either liquidating / discontinuing / selling certain entities (primarily Margo Networks Private Limited).

“Basis the same, the management has classified the investment in relation to these entities as Non-current Assets held for sale/disposal. Considering these assets are held for sale, the assets have been recorded at their realisable value, accordingly during the quarter ended 30 June 2023 and quarter and year ended 31 March 2023, the Company has recorded an impairment of Rs 211 lakhs and Rs 33,138 lakhs respectively on such assets…” it said.

The company further said that during the quarter ended 30 June 2023, the management has estimated liability to fund the closure costs at Rs 3,240 lakh, which has been approved by the board.

ZEEL also disclosed that the merger-related cost for Q1 FY24 stood at Rs 706.4 crore, up from Rs 149 crore in Q1 last fiscal.

The merger still has to get past the final order regarding the promoters of ZEEL that is pending with the Securities Appellate Tribunal (SAT). The SAT had on June 27 reserved its order after hearing Zee Entertainment Enterprises MD and CEO Punit Goenka's plea challenging the SEBI interim order that bars him and Subhash Chandra from holding the position of director or key managerial personnel in any listed company.

In June, SEBI passed the order against Subhash Chandra and Punit Goenka for “siphoning off funds from the listed company for their own benefit”. However, industry experts say this will not impact the merger in any way.