U.S. investment firm Invesco on Monday urged shareholders of India's Zee Entertainment to join its battle to oust the TV giant's chief executive over corporate governance concerns even amid its merger talks with a local unit of Japan's Sony Group.
Invesco, in an open letter sent to Zee Entertainment shareholders, said there was an "urgent need for independent perspectives on Zee's board given the company's governance failures and prolonged underperformance."
Invesco, one of Zee's biggest foreign investors, is locked in a legal tussle with Zee after it rejected the investment firm's requests to call a shareholder meeting to consider removing Zee's current CEO, Punit Goenka.
Invesco's Developing Markets Fund and its OFI Global China Fund LLC, which together own nearly 18% of Zee, have raised concerns over alleged financial irregularities that have plagued the company, and suggested six new independent board members to be appointed.
Zee has said it has tightened its governance processes, and its founder Subhash Chandra, who is the father of CEO Goenka, has accused Invesco of plotting a hostile takeover. It did not immediately respond to requests for comment on Invesco's letter.
The dispute has cast a cloud over Zee's potential merger with Sony that was expected to create a television powerhouse that could challenge top rival Walt Disney Co in a key growth market.
Initial terms of the merger show Goenka would be CEO of the merged entity, which will be majority owned by Sony, and Invesco said the deal would allow Chandra's family to raise their shareholding to up to 20%, from 4% now.
"We are calling on Zee shareholders to join us in asking why the founding family ... should benefit at the expense of the investors who hold the remaining 96%," Justin Leverenz, Invesco's chief investment officer, developing markets equities, said in a statement following the letter.
"We will firmly oppose any strategic deal structure that unfairly rewards select shareholders, such as the promoter family, at the expense of ordinary shareholders," Leverenz had said in the letter.