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Merger-bound media groups: Zee and Sony have announced the sale of 3 major Hindi channels in an effort to address the CCI's concerns regarding the mega-merger.
The merger of the two media giants was announced in December 2021. According to the deal, Sony Pictures Network India (SPNI), Zee Entertainment Enterprises Ltd. (ZEEL) & Bangla Entertainment Pvt. Ltd. were set to be amalgamated into Culver Max Entertainment Pvt. Ltd., which would be the largest entertainment network with 'unparalleled' bargaining power.
The Competition Commission of India (CCI) believed that the merged entity would wield too much influence due to its overbearing position. It concluded that the new entity could adversely affect the media industry by charging higher prices, thereby being harmful to the customers and the broadcasting industry as a whole.
However, a resolution was presented to the CCI by both entities. We at Jobaaj reported about the conditional approval received from the CCI, which allowed the media houses to merge after the fulfillment of certain conditions.
“Considering the material on record…submissions made by the notifying parties during the oral hearing on September 29, followed by written submissions made on September 30 and October 4, and factors provided under sub-section (4) of Section 20 of the Act (Competition Act, 2002), the commission is of the opinion, that the composite voluntary remedy proposed by the parties under Regulation 25(1A) of the Combination Regulations, addresses the prima facie concerns of a likely appreciable adverse effect on competition (AAEC)…and the commission decided not to further proceed with the investigation,” the CCI's order read.
Pursuant to such resolution, ZEEL & SPNI have announced the sale of 3 channels owned by ZEEL: Big Magic, Zee Action, and Zee Classic. This would significantly bring down the combined influence of 36% in the Hindi general entertainment segment (according to BARC data) which they currently wield.
However, the purchaser of the channels is also required to fulfill certain conditions before the purchase can be completed:
- The buyer should be independent of the new entity and its affiliates.
- The buyer cannot be Star or Viacom18, the direct competition of ZEEL & SPNI.
- The purchaser is required to have the financial resources, expertise, and incentive to maintain the divested business as an active competitor.
- Finally, the purchaser must not be likely to create any prima facie competition concerns or give rise to a risk that the implementation of the order could be delayed.
The stock of Zee Entertainment currently trades at around Rs 264.95 per share.
Article by Aman Agarwal.
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