NEW DELHI Reuters - Indian TV network Invesco is locked in a legal battle with its top investor Zee Entertainment after the U.S. company, citing corporate governance concerns, called for the CEO's removal and a revamp of the company’s board.
Zee says it has tightened its governance, but the row is unabated just as one of India's biggest news and entertainment TV groups plan a merger with Japan's local unit Sony Group Corp.
What is the dispute about?
Invesco's legal filings reviewed by Reuters - which are not public - indicate it wants changes at Zee with regard to corporate governance and financial irregularities that have plagued the company and even been flagged by the India's market regulator.
Invesco's Developing Markets Fund and its OFI Global China Fund LLC have a share in Zee together for a nearly 18% market position. They have suggested six new independent boards to be appointed and the removal of Zee CEO Punit Goenka.
Zee asked Invesco to call an extraordinary general meeting of shareholders on 11 September to consider its demands.
Invesco rejected Zee on Oct. 1's request to revamp the board. Invesco then took the battle to India's companies tribunal, where it is trying to force Zee to call the meeting, saying Zee's behaviour is oppressive A tribunal has ordered Zee to respond before Oct. 22.
The Indian TV giant says that it has implemented corrective plans to address concerns raised by the market regulator and that it follows the highest standards of governance It is unclear which way shareholders will vote if a meeting is called, but Zee's founder Subhash Chandra, father of CEO Goenka, has accused Invesco of plotting a hostile takeover.
They want to take over the company against Indian law. Chandra has said. Zee said good governance can help improve Invesco's business to the best of its ability.
While Sony was pushing for a shareholder meeting, Zee announced talks with Invesco. The terms say Goenka will be CEO of the merged entity and holding majority-owned by Sony.
Invesco has acknowledged at Indian tribunal hearings that it is not against Zee-Sony plan, but its filing does criticize how the two entered into talks.
The Sony deal would enable Chandra's family to raise their shareholding to 20%, from 4% now, Invesco said, adding that it was clearly an attempt to distract the general public and stall the convening of a shareholder meeting.
I urge Invesco to behave like a shareholder not as the owner, If you want a fight, then I will fight back, he said.
Zee, which offers dozens of entertainment channels and shows in many local languages in India for years, is a household name. Boney Kapoor remains the passion of an original Indian entrepreneur, Pray Zee Entertainment, and said on Twitter.
Zee, according to Invesco, tried in February to forge a deal with parts of an Indian group in a move that would have allowed Goenka to head the new company and raised his family's stake in the merged firm. Zee did not describe the group.
However, that deal did not go through as Zee did not believe it was in shareholders' interest.
In response, Invesco accepted that it did facilitate talks between Reliance and Zee, saying for the first time that the conglomerate is controlled by billionaire Mukesh Ambani.
Invesco added that it would not seek a deal that would dilute long-term shareholder interest.
Zee did not respond to a request for comment about any talks with Reliance.