'We are extremely disappointed...': Sony confirms termination of $10-bn merger deal with Zee

Japan's Sony Group Corp on Monday confirmed that it has sent a termination letter to Zee Entertainment Enterprises Ltd, citing its plans to call off the $10-billion merger deal between its India unit and the media network.

Sony cited unmet conditions of the merger agreement as the reason for the termination in a letter sent to Zee earlier on Monday.

“Culver Max Entertainment (CME) today issued notice to Zee Entertainment Enterprises Ltd. (ZEEL) terminating the agreement dated December 22, 2021, to merge ZEEL and CME. Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date.

"We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences," said Sony in a statement. 

The deal was perceived as crucial for the survival of the companies in a highly competitive market, given the impending merger between Disney’s Indian businesses and the media assets of Mukesh Ambani’s Reliance Industries.

The merger, announced more than two years ago, hit a stalemate over who will lead the combined company. Zee proposed CEO Punit Goenka, but Sony disagreed in light of a market regulator probe into Goenka.

On Friday, Zee had said it was committed to the merger and was working to close the deal through “good faith negotiations”. It was seeking to discuss an extension to a Jan. 20 deadline to close the deal.

Zee’s four-year pact with Disney’s Star for TV broadcasting rights of certain cricket events is under the scanner now and Zee might have to pay $1.32 billion to $1.44 billion over the tenure of the agreement, analysts have said, Reuters reported.

The broadcaster missed an early-January deadline to pay $200 million, Bloomberg News reported on January 9.

Zee shares closed 1.5% lower in a Saturday trading session in Mumbai. The market is closed on Monday for a public holiday in Maharashtra.

Sony had expressed concerns after market regulator Sebi barred him from holding managerial posts at Zee group entities in connection with a fund diversion case.

While Sebi’s order has been stayed by the Securities Appellate Tribunal, Sony was not comfortable with Goenka leading the merged entity due to the stringent corporate governance policies that are followed in Japan, reported PTI earlier this month.

The contentious issue for the completion of the deal is not just about Goenka leading the merged entity but also about how the Indian firm is able to meet the other closing conditions, an industry source told PTI.

The proposed merger of ZEEL, BEPL and CMEPL has already received regulatory approvals from the fair trade regulator CCI, bourses NSE and BSE, shareholders and creditors of the company.

In August last year, the Mumbai bench of the National Company Law Tribunal (NCLT) also gave a go-ahead to the merger.

According to reports, the bone of contention between ZEEL and Sony was about who should lead the merged entity.

The majority of the board of directors of the combined entity were to be nominated by the Sony Group.

The combined entity would have owned over 70 TV channels, two 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.

With inputs from agencies