Zee-Sony merger is off and opens up a multitude of options

Over two years after it was announced, the Zee-Sony merger deal has been terminated. Envisaged as the second largest after Star and Disney India, it was to be a combined entity with 75 channels with a strong presence in entertainment, sports and regional markets apart from two OTT platforms. It is a setback to both Zee and Sony, with all eyes on what they will now do.

Those familiar with the transaction point out there was a clear difference between why both the parties saw merit in going ahead with it. “For Zee, it was driven by financial challenges, while Sony saw a business need,” said one banker. According to him, Zee’s precarious position was on account of high debt at the promoter’s level and holding company, Essel Group. Sony, meanwhile, had a small presence with little to speak of outside Hindi general entertainment and losing the rights to the marquee Indian Premier League meant a revenue stream was lost. “There is a good chance that both Zee and Sony will now continue running their individual operations since another interested party really does not exist.”

Last June, an interim order from the Securities and Exchange Board of India (Sebi) barred Subhash Chandra, Essel Group’s Chairman, and his son Punit Goenka from holding key managerial positions in Zee Entertainment or any other listed firm. It accused them of having diverted money to private entities. That is viewed as one of the key reasons for the Zee-Sony merger not going through.

In a more a recent development, Reliance Industries and Disney are said to have signed a non-binding pact to merge their broadcasting businesses. Together, they have close to 110 channels. That will lead to both Zee and Sony becoming much smaller players. Interestingly, Sony, globally is not very keen on investing in the television business, said sources. “That means India will remain at the current scale of operations,” said a broadcasting industry official. According to him, there could now be a deal between Sony and Disney since the barriers for negotiation are removed. The time ahead looks quite fascinating.

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