Zee Entertainment Enterprises Ltd (ZEEL) and Sony Pictures Networks India (SPNI) have announced a merged entity that will use linear networks, digital assets, production operations and program libraries of both the companies. In a regulatory filing on Wednesday, ZEEL said it Board of Directors had given an in-principle approval to the merger with Sony Pictures Networks India. ZEEL and SPNI will have an exclusive period of 90 days, provided by a non-binding term sheet, during which the two companies will conduct mutual diligence and finalise definitive agreements.

ZEEL board has evaluated not only financial parameters, but also strategic value which SPNI brings to the table and concluded that the merger will be in the best interest of all the shareholders and stakeholders. ZEEL is India’s largest publicly-traded television network.

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Shareholders of Sony will also infuse $1.575 billion for a 52.93% stake in the merged entity, which will be a publicly listed company in India while ZEEL shareholders will hold 47.07% of the entity. Currently, 96.01% of ZEEL shareholding is public, while 3.99% is held by its promoters.

The merged entity will own over 70 TV channels, 2 video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.

Punit Goenka, Chief Executive Officer of Zee Entertainment Enterprises, will continue to be the managing director and CEO of the merged entity.

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The merger is in line with ZEEL’s strategy of achieving higher growth and profitability as a leading media and entertainment company across South Asia, R. Gopalan, chairman, ZEE Entertainment Enterprises Ltd. said in a statement.

ZEEL derives most of network viewership from regional general entertainment channels (GEC) and movies, while Sony has a stronger foothold on Hindi GEC and sports segments.

In 2018, Zee Entertainment sold its sports portfolio under the Ten Sports brand to Sony Pictures Networks India, along with a non-compete agreement that prevented Zee from entering the sports segment.

The merger will end Sony Pictures Networks’ hunt for a local partner in India to take on OTT segment leaders Netflix, Amazon Prime, and the Disney-Star collaboration. The company’s talks with Reliance-owned Viacom for a potential merger but the talks were called off last year after the companies couldn’t agree on points such as valuation and other merger clauses.

A report by independent transaction advisory firm RBSA Advisors estimated the market share of Netflix and Amazon Prime Video at 20% each, followed by Disney+Hotstar at 17%, ZEE5 at 9%, and SonyLIV and ALTBalaji at 4% each.