Zee Entertainment dips 6% amid reports of CCI scrutiny over Sony deal

According to a Reuters report, Competition Commission of India (CII), observed that the merger between the Indian unit of Sony and ZEE will potentially hurt competition

Shares of Zee Entertainment Enterprises (ZEE) dipped 6 per cent to Rs 241.75 on the BSE in Thursday's intra-day trade after reports suggested that the country's antitrust watchdog, Competition Commission of India (CII), observed that the merger between the Indian unit of Sony and ZEE will potentially hurt competition by having "unparalleled bargaining power".

At 02:14 pm, ZEE shares were 5 per cent lower at Rs 244.10, as against 1.4 per cent decline in the S&P BSE Sensex. In the past three months, the stock has underperformed the market with falling 3 per cent decline, as compared to 4 per cent rise in the benchmark index. However, in the past one year, it has rallied 41 per cent as against 2 per cent gain in the Sensex.

The Competition Commission of India's August 3 notice to the two companies stated the watchdog is of the view that a further investigation is merited. "It has given the two companies 30 days from August 3 to respond. The CCI's findings will delay regulatory approval of the deal and could force the companies to propose changes to its structure," Reuters reported. CLICK HERE FOR MORE

On its part, ZEE Entertainment said it continues to take all the required legal steps to complete all the necessary approval processes for the proposed merger.

Meanwhile, ZEE and Disney Star have signed a strategic licensing agreement for exclusive TV rights of ICC Men's cricket tournaments. As part of the agreement, Disney Star will license the television broadcasting rights of the International Cricket Council’s (ICC) men's and Under 19 (U-19) global events for four years (2024-27) for an undisclosed amount to ZEE.

Disney Star will continue to be the exclusive home for streaming of all ICC tournaments through its digital platform - Disney+ Hotstar. ICC has in-principle approved this arrangement.

The deal will enable re-entry of ZEE in big league sporting event, as stated by the management earlier and will boost overall network viewership market share. "We believe the viewership of sports on TV/pricing potential will be the key determinant of profitability/margins from this move, which we believe may be lower than entertainment segment," ICICI Securities said.

ZEE has been progressing well on digital business with launching new shows each quarter. Thus, analysts at Sharekhan believe the proposed merger would be a strategic fit from a revenue perspective and would help the combined entity to emerge as a strong player in the entertainment industry for capturing the significant opportunity in the linear business.

"Further, the merged entity would allocate its growth capital towards premium content, including sports event rights, which would strengthen its position in the OTT space," the brokerage firm said in a June quarter result update.