Sony sends notice to terminate merger with Zee Entertainment

Sony is also seeking $90 million in termination fees from Zee, The Mint reported.

“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,” Sony said in a statement after notifying Tokyo Stock Exchange.

“We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences,” it added.

Punit Goenka had got a reprieve from the Securities Appellate Tribunal (SAT) on October 30, 2023, overturning a ban on him by the market watchdog Securities and Exchange Board of India (Sebi) to hold directorship in Zee group even as a regulatory probe over allegations of fund diversion still remain.

Sony has been uncomfortable with this regulatory overhang in view of its corporate governance policies, experts tracking the deal said. It has been pushing the name of its India MD & CEO NP Singh for the top job, which Goenka has opposed.

While the expected completion of the deal was December 21 last year, Zee had sought a deadline extension on December 20, which was to expire on January 20. This 30-day grace period was included in the merger pact signed in December 2021.

“The definitive agreements provided that if the merger did not close by the date 24 months after their signature date, the parties would be required to discuss in good faith an extension of the end date required to make the merger effective by a reasonable period of time,” the Japanese conglomerate said.

Sony said such discussions were required to be held for a period ending thirty days after the end date. The definitive agreements further provided that if the parties are unable to agree upon such an extension by the end of the discussion period, any party could terminate the definitive agreements by providing written notice.

“The merger did not close by the end date as, among other things, the closing conditions to the merger were not satisfied by then. SPNI has been engaged in discussions in good faith to extend the end date, but the discussion period has expired without an agreement upon an extension of the end date,” it said.

“As a result, on January 22, 2024, SPNI issued a notice to ZEEL terminating the definitive agreements. Sony has not included the impact of the merger in its consolidated financial results forecast for the fiscal year ending March 31, 2024, which was announced on November 9, 2023, and does not anticipate any material impact on its consolidated financial results as a result of the termination of the definitive agreements for the merger,” Sony said.

“As I arrived at Ayodhya early this morning for the auspicious occasion of Pran Pratishtha, I received a message that the deal that I have spent 2 years envisioning and working towards had fallen through, despite my best and most honest efforts. I believe this to be a sign from the Lord. I resolve to move ahead positively and work towards strengthening Bharat’s pioneering M&E Company, for all its stakeholders. Jai Shri Ram,” Zee’s Punit Goenka posted on microblogging platform X as he visited the temple town of Ayodhya for Ram Temple’s inauguration ceremony.