Zee shares extend fall, down over 3%; Reliance-Disney deal seen as negative for beleaguered media company

Zee Entertainment share price fell over 3% on Thursday, extending decline from previous session’s steep loss. Zee shares fell as much as 3.58% to ₹156.20 apiece on the BSE.

Zee Entertainment Enterprises stock price had fallen 6.36% in the previous session. The stock is down more than 37% in three months and 43% in 2024 so far.

Zee shares have been under heavy pressure recently after the collapse of its proposed merger with Sony group’s India unit.

In a development that could hurt the media company Zee further, is the latest announcement of billionaire Mukesh Ambani-led Reliance Industries Ltd (RIL) entering into a strategic joint venture with global media behemoth Walt Disney Co. to merge Viacom18 and Star India.

RIL and Walt Disney on February 28 announced signing of definitive agreements to merge their media operations in India, giving rise to a ₹70,352 crore-media behemoth. 

Read here: Reliance, Disney India merge streaming, TV assets to create ₹70,352 crore media powerhouse; 5 key highlights

RIL will invest close to ₹11,500 crore ($1.4 billion) into the JV to grow the over-the-top (OTT) business. Along with its affiliates, Reliance will hold a 63.16% stake in the combined entity while Disney will have the remaining 36.84% shareholding. The transaction valued the JV at ₹70,352 crore ($8.5 billion) on a post-money basis, excluding synergies. 

Analysts believe that the deal would hurt other industry players like Zee, as they would have to compete with a much larger entity.

RIL’s merger with Disney will create a broadcasting giant with a 40-45% ad market share, with significant overlap in urban markets. Star India and Viacom18 currently have a portfolio of 77 and 38 channels, respectively, across genres. On the OTT side, despite being a late entrant, JioCinema has expanded aggressively, initially by managing to bag IPL rights and subsequently with the content of NBC Universal and Warner Bros.

“Zee, which has already been struggling since its merger breakdown with Sony, should be negatively impacted by the creation of a larger entity. Both content producers and advertisers are likely to gravitate towards the RIL-Disney entity, which will also cater to the largest set of audience, further weakening its overall competitive position,” Emkay Global Financial Services said.

Also Read: Media empire takes shape, with Reliance-Disney at helm

Moreover, it believes Jio’s marketing muscle would also make it more difficult for Zee to grow.

“This deal reinforces our negative view on Zee and leaves it with a lesser number of suitors, thus further lowering its bargaining power,” said the brokerage firm. 

It does not anticipate major value accretion for Reliance from this deal immediately, but believes it to be advantageous strategically and positive for the company. 

It retained a ‘Sell’ rating on Zee Entertainment shares with an unchanged target price of ₹165 per share, while maintaining an ‘Add’ rating on RIL.

At 11:30 am, Zee shares were trading 2.62% lower at ₹157.75 apiece on the BSE. 

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