Invesco says it facilitated tie-up talks between India's Reliance and Zee

Invesco said on Wednesday it facilitated talks between India's Reliance Industries and Zee Entertainment earlier this year on a possible merger, revealing for the first time that India's richest man, Mukesh Ambani, was interested in the television giant.

But the U.S. investment firm rejected allegations from Zee that it was using double standards in objecting to a merger of Zee and Sony Group's India unit with terms similar to those discussed with Reliance.

Invesco's response is the latest in a growing public spat in which the U.S. asset manager, which owns 18% of Zee, is calling for a revamp of Zee's board and the removal of CEO Punit Goenka over alleged corporate governance lapses.

 

Zee said on Tuesday that the opposition by Invesco to the proposed Sony deal "runs contrary to the very deal Invesco was proposing" with Reliance and that the U.S. firm's demands were not motivated by concerns around corporate governance or the company's business.

Zee's founder has accused Invesco of plotting a hostile takeover of the company, and the company has dismissed requests to call a shareholder meeting to vote on the U.S. investor's demands, including appointing six new independent board members it proposed. Zee earlier said it has tightened its processes.

The two sides are now locked in a bitter legal and public tussle in which they are lashing out at each other almost daily. Invesco has asked an Indian tribunal to order Zee to call the meeting, and Zee has until Oct. 21 to respond.

"The role of Invesco, as Zee's single largest shareholder, was to help facilitate that potential (Reliance) transaction and nothing more," Invesco said.

"...The implication that we as a shareholder would seek out a transaction for Zee that is dilutive to the long-term interests of ordinary shareholders, including ourselves, simply defies logic."

Goenka's family, founders of the company, owns about 4% of Zee.

The company on Wednesday denied that other shareholders would be diluted under a plan for the family to receive more shares, representing 2.11%, of the merged company in exchange for a non-compete clause because no new equity would be issued.

Under the merger deal, Goenka's family can raise its stake to 20% of the resulting company. Zee said the terms would be governed by law and disputed Invesco's charge that the company had not specified how this would occur.

"In the meantime, we urge Invesco to stop publishing half truths about the proposed deal in the media and let the board of directors of the company and the management work towards finalising this deal (which is clearly for the benefit of all stakeholders)," Zee said in a statement.

Reliance confirmed it approached Zee for a merger with help from Invesco but said the talks fell apart as the investment firm did not agree with a demand from Goenka's family for an option to increased their stake later.

"We ... have never resorted to any hostile transactions," the conglomerate said. "We regret our being drawn into the dispute between Zee and Invesco."

Reliance has a vast media presence in India through its Network18 business that includes VH1, Nickelodeon, MTV and a range of other local language and news channels.

Zee's statement on Tuesday said it had rejected the Reliance offer over concerns about valuation and that "it would result in a loss to the stakeholders of the company."

"The new revelations show that Invesco is not just a shareholder exercising its rights but a motivated party," said Shriram Subramanian, founder of shareholder advisory firm InGovern, adding that the news raises doubts whether the six directors Invesco has proposed are "actually independent."

"The corporate veil has finally come off," he said, calling for a regulatory probe.

Market regulator Securities and Exchange Board of India did not respond to a request for comment.

Invesco has alleged that financial irregularities that have plagued Zee and have been flagged by India's market regulator were linked to Goenka's family.

In recent weeks, Zee, which is a household name in India's television and film landscape, has found support from Bollywood stars, who have said on social media they hope the crisis ends soon for the group.