Zee-Sony merger delay: Sony looks at a potential acquisition of Disney’s India business

Amid the delay in the merger of Zee Entertainment Enterprises with Sony Pictures Entertainment (SPE), the global entertainment unit of Japan’s Sony Group, has initiated preliminary talks with Walt Disney Co. about a potential acquisition of its India business. The company is looking at it as a contingency plan in case its ongoing merger agreement with Zee faces more delays or doesn’t materialise since it has been in the works for almost two years.

The Zee-Sony merger received National Company Law Tribunal (NCLT) approval without any conditions on August 10. Since then, the company has been working on closing precedents (CPs) of the merger and it is expected that the merged company could be listed by December. “In case it gets pushed beyond December, there is a high likelihood that Sony may advance talks with Disney post that,” Karan Taurani, Vice President, Elara Capital, said.

According to Elara Capital, Sony is looking out for a strategic partner for its India and global (TV) business but it’s unlikely that the Disney-Sony deal will go through since there is a wider overlap for both platforms as they both cater to urban audience in a big way. “Regulatory approvals like CCI, NCLT may take over a year. CCI may not provide clearance or ask to shutdown channels, as Sony/Disney will have a much larger TV ad market share of 45 per cent (Zee/Sony TV ad market share is 25 per cent),” Taurani said.

Elara Capital said that Sony may have to shelve out much more capital to buyout Disney, as valuations for Disney India is potentially in the range of $4-6 billion (linear TV only) and $10-11 billion (linear TV and Hotstar). “We believe the Zee/Sony merger going through is of utmost importance for Zee’s valuations to sustain and we don’t foresee Sony taking a firm call to acquire Disney unless the merger is delayed,” he adds.