Picture abhi baki hai! Zee shares rally 7% as Sony merger talks re-start

Shares of debt-ridden Zee Entertainment Enterprises Ltd (ZEEL) rallied over 7% to the day’s high of Rs 192 on Tuesday as the media house re-initiated talks for a merger with Sony Group after the $10 billion deal was cancelled last month.

In a fresh dramatic twist, which is no less than an unending soap opera, Zee has re-engaged with Sony Group Corp in a last-ditch attempt to revive their merger, ET reported earlier today. According to the report, representatives from the two sides have held meetings across locations in Mumbai and efforts to salvage the deal have gathered momentum over the last fortnight.

Zee is expected to inform Sony over the next 24-48 hours if it’s willing to accept all terms and conditions, including conditions precedent (CPs), and go ahead, the report said.

Also read | Zee, Sony huddle in dramatic twist to salvage merger

Earlier on January 23, Zee shares had crashed 33% to a 52-week low of Rs 152.5 to record its worst single-day fall in history. Some bottom fishing was noticed in the next few days on expectations that Zee will draw other suitors for potential deals.

The proposed merger of Zee and Sony had led to a valuation re-rating of Zee in anticipation of an improvement in corporate governance and significant merger synergies. The stock has been the subject of multiple de-ratings and sell calls since the Sony deal was terminated. CLSA had downgraded Zee to SELL from BUY with a revised target price of Rs 198, Nuvama also reduced its FY25E/26E EPS on Zee by 16%/24% and downgraded the stock to reduce rating with a target price of Rs 190.Elara had downgraded Zee to sell with a target price of Rs 170 while Motilal Oswal had also downgraded the stock to neutral with a target price of Rs 200.

In the December quarter, Zee had reported 141% YoY growth in its consolidated net profit at Rs 58.5 crore while its revenue fell 3% YoY to Rs 2,045 crore. The company anticipates a gradual recovery in margins to start reflecting from H2 FY25 while aspiring to register an EBITDA margin of 18-20% for FY26, along with 8-10% revenue CAGR going forward.

Though the company is actively implementing measures to revive the business and efficiently run business operations as a stand-alone entity, analysts say concerns around weak financial positioning, corporate governance, and litigation outcomes continue to remain.

Also read | At $365 billion, Tata Group grows bigger in size than entire Pakistan economy

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