Invesco says it facilitated tie-up talks between India's Reliance and Zee

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A guard stands next to a banner of Zee television outside a film studio in Mumbai, India, September 24, 2021. REUTERS/Francis Mascarenhas/File Photo/File Photo

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MUMBAI, Oct 13 (Reuters) - Invesco (IVZ.N) said on Wednesday it facilitated talks between India's Reliance Industries (RELI.NS) and Zee Entertainment (ZEE.NS) earlier this year on a possible tie-up, revealing for the first time that India's richest man, Mukesh Ambani, was interested in the television giant.

But the U.S. investment firm rejected allegations from Zee that it was resorting to double standards by objecting to a potential merger with Sony Group's (6758.T) India unit with terms similar to those discussed with Reliance.

Invesco's response is the latest in a growing public spat where the U.S. investor, which owns 18% of Zee, is calling for a revamp of Zee's board and the removal of CEO Punit Goenka over alleged corporate governance lapses.

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Zee said on Tuesday that the opposition by Invesco to the proposed Sony deal "runs contrary to the very deal Invesco was proposing" with Reliance and that the U.S. firm's demands were not motivated by concerns around corporate governance or the company's business.

Zee has accused Invesco of plotting a hostile takeover of the company and dismissed requests to call a shareholder meeting to vote on the U.S. investor's demands, including appointing six new independent board members it had suggested. Zee earlier said it has tightened its processes.

The two sides are now locked in a bitter legal and public tussle where they are lashing out at each other almost daily. Invesco has asked an Indian tribunal to order Zee to call the meeting, and Zee has until Oct. 21 to respond. read more

While the Zee comments on Tuesday did not name which entity Invesco had tried to arrange a deal with, the U.S. firm's statement revealed for the first time that it was Reliance, the giant conglomerate run by Mukesh Ambani.

"The role of Invesco, as Zee's single largest shareholder, was to help facilitate that potential transaction and nothing more," Invesco said.

"...the implication that we as a shareholder would seek out a transaction for Zee that is dilutive to the long-term interests of ordinary shareholders, including ourselves, simply defies logic."

Reliance confirmed it approached Zee for a merger with help from Invesco but said the talks fell apart as the investment firm did not agree with a demand from Goenka's family for an option to raise their stake later.

"We ... have never resorted to any hostile transactions," the conglomerate said. "We regret our being drawn into the dispute between Zee and Invesco."

Reliance has a vast media presence in India through its Network18 business that includes VH1, Nickelodeon, MTV and a range of other local language channels as well as news portals Firstpost and Moneycontrol and news channels CNN-News18 and CNBC TV18.

But Zee's statement on Tuesday said it had rejected the Reliance deal offer over valuation concerns and that "it would result in a loss to the stakeholders of the company."

Zee did not respond to requests for comment on Wednesday.

"The new revelations show that Invesco is not just a shareholder exercising its rights but a motivated party," said Shriram Subramanian, founder of shareholder advisory firm InGovern, adding that it raises doubts whether the six new independent directors Invesco has suggested are "actually independent".

"The corporate veil has finally come off," he said, calling for a regulatory probe with documentary evidence from all parties.

Market regulator Securities and Exchange Board of India did not respond to a request for comment.

Invesco has alleged that financial irregularities that have plagued Zee and have been flagged by India's market regulator, were linked to Goenka's family.

In an open letter to Zee shareholders this week, Invesco objected to initial terms of the Sony deal that they said give the founding family of Zee an option to ramp up their stake to 20%, from 4%, via methods that remain "wholly opaque".

In recent weeks, Zee, which is a household name in India's television and film landscape, has found support from Bollywood stars, who have said on social media they hope the crisis ends soon for the group.

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Reporting by Abhirup Roy, Editing by Aditya Kalra and Raju Gopalakrishnan and Louise Heavens

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