Zee shares fall heavily after failed merger with Sony India

Shares of Zee Entertainment fell 10% on Tuesday, set for their biggest one-day decline since April 2021, when Sony India canceled a $10 billion merger with the Indian broadcaster, sharply Concern grew about its survival in a competitive industry.

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At least five brokerages said investors should sell Zee’s stock and lowered their price targets on the stock, according to LSEG data.

Zee’s stock last traded at Rs 208.30, its lowest since mid-July 2023. They had already lost about 8% since the merger was announced in September 2021 and are down 16% so far in 2024 due to concerns about the deal.

The collapse of two-year-long talks on Monday to create one of India’s largest TV broadcasters creates more uncertainty for cash-strapped Zee, especially as Disney plans to sell its Indian businesses to billionaire Mukesh Ambani. Is seeking to merge with the media assets of Reliance.

Brokerage MK Global said Zee “going solo” is a low-probability event and believes the company will attract other investors. However, it cautioned that a failed deal could lead to shareholder activism against Zee’s management.

Although neither Japan’s Sony Group nor Zee on Monday elaborated on the unfulfilled terms that led to the deal falling apart, a standoff over who would lead the combined company had put the merger in jeopardy.

Emkay downgraded Zee’s stock to “sell”, as did four other brokerages, according to LSEG data. The average rating of 19 analysts covering Zee has dropped to “Hold” from “Buy”, while their average price target has fallen 16% to Rs 253.

CLSA doubled down Zee from “buy” to “sell” and slashed its target price by 34%, estimating that the stock’s price-to-earnings ratio, a key valuation metric, will be at the current level at the time of the merger. Will be at 18x ​​to 12x-level. declare.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – Reuters)