US cable major Comcast-led consortium closing in on ZEE Entertainment buy
Comcast, which owns NBCUniversal, and Atairos, a $4-billion investment company led by former Comcast CFO Michael Angelakis, is looking to team up with PE fund Blackstone and James Murdoch’s family office Lupa Systems to bid for Zee Entertainment Enterprises (ZEE), said people in the know.
Both sides have engaged in management meetings but the talks are very preliminary in nature and might not translate into a deal, warned the sources.
ET was the first to report in its February 19 edition about Comcast and Atairos teaming up for the Subhash Chandra flagship. Subsequently, Lupa and Blackstone joined the grouping.
While Comcast will be leading the consortium, Murdoch is expected to act as the local partner on the ground and take up a small stake.
Lupa also cannot have more than 9-10% stake in ZEE, as part of a non-compete agreement with the Walt Disney Company after Rupert Murdoch sold 21st Century Fox (including Star India) to Disney.
While the ZEE promoters want to stay on to run the business, the potential buyers are keen to take control after triggering an open offer or get a definitive path to control, even if ZEE’s managing director Punit Goenka stays on in an executive role initially.
A ZEE spokesperson said that the stake sale is at an advanced stage and any additional details cannot be shared at this stage due to “confidentiality agreements”. Essel Group is confident to close the deal well within the purview of the timelines agreed with the lenders,” he added.
The deal will give a breather to Subhash Chandra, whose Essel Group is facing severe debt crisis. He had, last year, announced his plans to sell half of the promoters’ then 41% stake in the company.
It has been trying to sell businesses and assets across various verticals — power transmission, roads, renewables — to reduce group leverage of Rs 13,000 crore. They have also been in discussions with Adani for its solar parks and with Bharti for merging their DTH businesses, according to source.
In last November, ZEE announced that its promoters, led by Subhash Chandra, plan to sell up to 50% stake to a strategic partner in order to deleverage their balance sheet and also for asset monetisation efforts.
As per March 2019 disclosures, the promoters own 38.2% of the company, of which 66.18% is pledged with mutual funds, insurers and other financial institutions. However, analysts say it is currently down to 36.7%.
Essel Group owes Rs 7,000 crore to mutual funds and a stake sale has to happen before September 2019 to avoid default.
The $84-billion Comcast, led by Brian Roberts, has been a serial buyer and seller of media assets including cable networks, broadband assets, content providers, internet providers and even animation studios since the late 1980s.
Interestingly, Blackstone bought out Essel Propack from Subhash Chandra’s brother Ashok Goel earlier this year.
Comcast lost out on 21st Century Fox after Walt Disney Co trumped their $65-billion bid last year. The company has been scouting for assets in India and other high-growth markets. ZEE gives them the much-needed India launchpad, said media analysts.