Zee Entertainment Enterprises Ltd. witnessed a sharp decline in its shares, plummeting as much as 10% following the abrupt cancellation of its planned $10 billion merger with Sony Group's India unit.
As of early trade, Zee's stock traded at ₹208.3, marking its lowest point since mid-July 2023. This significant drop comes after the stock had already experienced an 8% decline since the merger announcement in September 2021 and a cumulative 16% slump in the first month of 2024, fueled by mounting apprehensions surrounding the deal.
The termination of the two-year-long merger negotiations on Monday, aimed at creating a major player in India's television broadcasting sector, has introduced heightened uncertainty for Zee, which was already facing financial challenges.
At least five brokerages have advised investors to sell Zee's stock, according to data from the London Stock Exchange Group (LSEG), as reported by Reuters. These brokerages have not only recommended selling but also revised their target prices for Zee's stock.
Emkay Global, among other brokerages, expressed skepticism about Zee's ability to navigate the industry independently, deeming it a low-probability scenario. The brokerage anticipates that Zee may attract alternative suitors but warned that the failed deal could provoke shareholder activism against Zee's management.
While the specific reasons for the deal's collapse were not disclosed by either Sony Group or Zee, a deadlock over the leadership of the merged entity emerged as a critical threat to the merger's success.
Emkay Global downgraded Zee's stock to "sell," mirroring similar moves by four other brokerages, as indicated by LSEG data. Among the 19 analysts covering Zee, the average rating has shifted from "buy" to "hold," and the median price target has plummeted by 16% to Rs 253, according to Reuters.
As Zee struggles with the aftermath of the failed merger, industry observers are closely watching for potential suitors and the impact on the company's overall strategic direction. The coming weeks will likely bring further clarity on the future trajectory of Zee Entertainment Enterprises Ltd.
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