The board of Zee Entertainment Enterprises Ltd. has approved a proposal to merge with Sony Pictures Networks India Pvt., days after investors called for a leadership change at India’s largest publicly traded television network over governance concerns.

In a filing with the stock exchanges early on Wednesday, Zee Entertainment said:

• Its board has approved the execution of a nonbinding term sheet with Sony Pictures Networks India (Sony India).

• That relates to a potential transaction involving a composite scheme of arrangement for the merger of the company and Sony India.

Zee Entertainment’s board approved the deal in a meeting on Sept. 22.

Prior to the merger, Sony India’s promoters will infuse growth capital into Sony India such that it will have a cash balance of about $1.58 billion (Rs 11,800 crore).

According to the indicative initial merger ratio, shareholders of Zee Entertainment will hold approximately 47.07% in the merged company and the promoters of Sony India will own 52.93 %.

Thus, the promoters of Sony India will have the right to appoint majority directors on the board of the merged company.

Punit Goenka, the filing said, will continue to be the managing director and chief executive officer of the combined entity. He recused himself from the board meeting.

The transaction provides a non-compete fee to the promoter of Zee Entertainment—Subhash Chandra and his Essel Group. Goenka is Chandra’s son.

Sony India’s promoters will transfer shares of the merged company to Essel Group to maintain its shareholding at 3.99%.

Currently, Essel Group owns exactly as much in Zee Entertainment. The rest is held by public shareholders, led by foreign portfolio investors (57.46%), insurance companies (10%) and mutual funds (8.10%).

According to the company’s media statement, the term sheet provides that the promoter family is free to increase its shareholding up to 20%.

A merger with Sony India will require shareholder approval.

The deal with Sony has been struck even as Zee Entertainment faces a vote of no-confidence from one of its longest standing institutional shareholders: Invesco.

On Sept. 11, two of its funds, Invesco Developing Markets Fund and OFI Global China Fund, that together own 17.88% of Zee Entertainment, requisitioned an extraordinary general meeting of shareholders to vote for removal of Goenka, managing director and chief executive of the company. They also sought to remove independent directors Manish Chokhani and Ashok Kurien as directors.

A day later, Kurien and Chokhani resigned with immediate effect, citing personal reasons.

Subsequently, at the company’s annual general meeting on Sept. 14, Goenka made no mention of stepping down despite the shareholder pressure.

Invesco and OFI have also sought to appoint six new independent directors on the board of Zee Entertainment.

In the midst of this investor action, billionaire investor Rakesh Jhunjhunwala and BofA Securities Europe SA bought shares of Zee Entertainment, contributing to a record surge in its share price.

Even as Zee Entertainment’s public shareholders assess governance issues at the company, they may soon have to decide whether business advantages of a Zee-Sony merger outweigh the optics of the deal and how it re-cements Goenka and his father’s position in the company.