Japan’s Sony Group Corporation has called off the proposed $10 billion merger of Zee Entertainment Enterprises Ltd (ZEEL) with Sony Pictures Networks India Private Ltd (now known as Culver Max Entertainment Ltd), a wholly-owned subsidiary of the Sony Group. Reacting to the Sony move, ZEEL said it will take steps, including appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings. ZEEL said it received communications dated January 22 from Culver Max and Bangla Entertainment Pvt Ltd (BEPL) “purporting to terminate the merger co-operation agreement (MCA) and seeking termination fee of $ 90 million on account of alleged breaches by ZEEL of the terms of the MCA, and invoking arbitration against the company and seeking emergency interim reliefs against the company”. Sony Corporation issued a notice terminating the definitive agreements entered into by SPNI and Zee Entertainment relating to the merger of ZEEL with and into SPNI, which was finalised on December 22, 2021. While Sony cited the delay in the merger for termination of the merger plan, there were disputes about the leadership of the combined entity by Zee’s managing director and chief executive officer (MD and CEO) Punit Goenka. “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. While the expected completion of the deal was December 21, 2023, 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 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, Sony said. In a filing to exchanges, Zee Entertainment Enterprises refuted the claims and assertions made by Culver Max and BEPL regarding alleged breaches of the MCA (merger co-operation agreement), including their claims for the termination fee, and reserves all its rights in this matter. “The company is evaluating all available options and basis the guidance received from the board and will take all necessary steps to safeguard the long-term interests of its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings,” Zee 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,” Goenka posted on X, formerly Twitter. “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,” Punit Goenka wrote on the micro blogging site. “We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences,” Sony said. In June 2023, market regulator SEBI issued an interim order which restrained Punit Goenka from holding any key positions in any listed company, in a matter related to alleged diversion of funds. Goenka got a reprieve from the Securities Appellate Tribunal (SAT) on October 30, 2023, overturning a ban on him by the Sebi to hold directorships 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, sources said. It has been pushing the name of its India MD & CEO NP Singh for the top job, which Goenka opposed. “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 per the original merger plan, Sony would have held 51 per cent stake in the entity and promoters’ share would have been 4 per cent while the rest would have been held by the public. The merger proposal was first announced on September 22, 2021 after Invesco, the largest shareholder of ZEEL, sought an extraordinary general meeting of ZEEL shareholders for the removal of Punit Goenka, MD and CEO, and appointment of six directors. 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.
