Friday, April 16, 2010

Breaking (Zee) News - Demerger

There was breaking news of a different variety in Zee news. Zee News went through a scheme of arrangement involving demerger of the General entertainment channels from Zee news and merging them into Zee entertainment.
The shareholders of Zee news as per the arrangement were eligible for 4 shares of Zee entertainment for every 19 shares held in Zee news. They would continue to hold the news business in Zee news.
We tracked the deal from the initial announcement stage and monitored the price movement at every milestone. Find below the various milestones and the cost of creating the residual Zee News


The record date for the transaction was set for 16th April. Arpit had arrived at a fair value for the Zee news share in the Rs 9- 10 bracket.  Post the ex date the market traded the stock in the Rs 18-20 price band and there was clearly returns to be made on the deal.
This however is with the benefit of hindsight. I never invested in this deal as there was clearly time risk involved with no clear timelines on when the court order could come thru. Though I think there was a opportunity just after the court approval came thru. It was a interesting transaction to monitor in terms of price movement at every milestone.

But once in a while it is ok to be a spectator and stay away from the news :-)

10 comments:

sunny said...

The bigger question is why such demerger. Zee has stopped its movies business, zee regional channels are also not doin good, so there was only news & zee tv the two good performers, by separating them, the zee news shares have good underlying assets but zee entertainment will be fully loaded with underperformers. Are they looking for some investors or alliances?

Pradeep said...

"The shareholders of Zee news as per the arrangement were eligible for 4 shares of Zee entertainment for every 19 shares held in Zee news. They would continue to hold the news business in Zee news."

When this news came, i.e. initial announcement, Zee ent 4 shares were less expensive than the 19 zee news shares and the gap has widened. How would you be able to make money then? Sorry if very naive.

sunny said...

Well said, there wont be any profits in this arrangement of only 4 shares and the offer itself is deceptive.
Furthermore, the ZEE news will be loosing some assets which will be added to Zee ent, this will surely affect the earning horizons and factors like PE ratio etc, hence, it will be wise for zee news shareholders to book profits as it is completely overvalued.

Ninad Kunder said...

Hi

As I put in the post I didnt build a position in this special situation but merely tracked it as a observor.

Pradeep you need to factor in that in addition to the 4 shares of zee ent there was also the residual shares in zee news which had the news business. So what I have done is to track the cost of creating those residual shares in zee news thru the life of the trade.

the fact that zee news traded nearly at Rs 20 post the demerger record date, somebody who would have invested in the trade would have made money.

Cheers

Ninad

Inquisitive Stranger said...

Hi Ninad,

Completed reading all the POST, awesome, Not that i understood all the terms which you use, but great writing and good knowledge. Have a question, many question, Why dont you add a button on the blog that says contact me, That way we can rech you with specific questions.

Mitesh said...

Hi By When are we going to receive the 4 shares of the Zee entertainment against 19 Shares of Zee News.

Ninad Kunder said...

Hi Inq Stranger

You can reach me in ninadinvest@gmail.com.

Cheers

Ninad

Ninad Kunder said...

Hi Mitesh

To be honest, i havent tracked the deal subsequent to the record date as I want invested in it.

It would be ideal if u speak to the Company secretary or the investor relations person at Zee news to get a update on this.

Cheers

Ninad

Mitesh said...

Dear Ninad,

By Any chance do you have the email id of Company secretary or the investor relation officer so i can check with them about the same.

Cheers,
Mitesh

Ninad Kunder said...

Hi Mitesh

The data is available on both the exchanges under the contact information for both the companies.

Cheers

Ninad