Zee-Sony settlement removes overhang but outlook stays uncertain: Analysts

Zee Sony merger settlement news: Any meaningful re-rating in Zee share price, analysts said, should happen in case ZEE finds a new partner or strategic investor

Zee Sony settlement news:Even as the settlement of merger dispute between Zee Entertainment Enterprises (ZEEL) and Culver Max Entertainment, operating as Sony Pictures Networks India (SPNI), has removed a key overhang over ZEE, the share price is unlikely to be re-rated anytime soon, analysts cautioned on Wednesday.

Any meaningful re-rating, they said, should happen in case ZEE finds a new partner or strategic investor.

"The settlement of the merger dispute marks an end to a tumultuous journey of almost three years. While this settlement does remove a key overhang, lack of any major strategic investor does not inspire confidence," said Pulkit Chawla, research analyst at Emkay Global Financial Services.

 

The brokerage has retained its "Reduce" rating with a target price of Rs 150.

ZEEL, together with its group company Bangla Entertainment, arrived at "an amicable non-cash settlement" with Culver Max Entertainment, operating as Sony Pictures Networks India (SPNI) on Tuesday.

The companies withdrew all claims against each other and said that none of the parties would have any outstanding or continuing obligations or liabilities to the other.

Analysts, however, remain sanguine about the company"s outlook as the current business environment is "tough". One of the key issues, they said, is the intensified competition against the larger combined entity of Disney-Reliance (if their merger goes through).

Earlier, in February, Reliance Industries Limited, Viacom 18 Media Private Ltd, and The Walt Disney Company said that they would sign definitive binding agreements to form a joint venture to combine the businesses of Viacom18 and Star India.

The deal is worth around $8.5 billion, which could create a giant player in the digital broadcasting industry, with a combined user base of 558 million. It, however, awaits clearance from the Competition Commission of India (CCI).

"While the settlement of the disputes will allay investors" concerns, we remain concerned about the potential impact of the company"s cost savings measures and revenue outlook amid rising competition and consolidation in the industry," said those at Citi with a "Sell" rating and a target price of Rs 137.

On the bourses, ZEE share price fell 2 per cent to Rs 147.5 per share in Wednesday"s intraday trade after soaring 11.45 per cent on Tuesday. By comparison, the BSE Sensex was up 0.25 per cent at 12:20 PM.