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Sony-Zee merger terminated

Japan’s Sony Group Corp. sent a termination letter to Zee Entertainment earlier this week to end the $10 billion merger

zee sony merger

More than two years after announcing the proposal, Japanese entertainment giant Sony Group Corp. said that its Indian arm, Culver Max Entertainment Pvt. Ltd., would no longer merge with Zee Entertainment Enterprises Ltd (ZEEL).

The companies could have combined their linear networks, digital assets, and production operations to create a mega entertainment firm worth $10 billion.

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The original merger plan

The merger of Culver Max Entertainment Pvt. Ltd. and Zee Group would have perhaps created the biggest entertainment entity in India. The agreement also included that the company would have a cash balance of $1.5 billion at the closing of the deal, including an infusion by current stakeholders.

After the merger, Sony would indirectly hold a majority 50.86% of the combined company, and Zee Group would own 3.99%. Other Zee shareholders would have held 45.15%.

What happened?

The deal was supposed to go through on December 21st, 2023, but Zee sought a deadline extension. Post extension, it was supposed to expire on January 20, and this grace period was included in the pact signed the previous month. Even after the extension expired, the deal couldn’t go through, and Sony decided they couldn’t take the delay anymore.

This delay was the reason cited in the termination letter Sony sent on Monday, the 22nd. 

The Indian Express reported Sony’s statement: “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.”

The agreements previously signed by the parties outlined that if the parties are unable to sign the deal by the time the extension expires, any party could terminate the deal without prior notice.

Also Read: Zee-Sony Merger

Zee Group leadership tussle

Sources also note that there might have been some problems with the leadership at Zee Group, especially with MD & CEO Punit Goenka.

Regulators also banned Essel Group’s Chairman Subash Chandra, along with Goenka, from holding any key managerial positions in any companies that would be a result of a merger or amalgamation to Zee.

In June 2023, regulators issued an interim order which restrained Zee Group’s Punit Goenka from holding key positions in any listed company. Even after the Securities Appellate Tribunal (SAT) overturned the ban on him, allegations about fund diversion from the company were still present.

That enabled Goenka to potentially become the Managing Director of the combined company had the merger gone through.

Also Read: Merger vs. Acquisition

What should Zee do now?

According to reports made to exchanges, ZEEL has refuted claims made by Sony Group in India regarding the alleged breaches of agreement timelines. The company also stated that it is evaluating all necessary steps to conserve the company’s shareholder interests.

ZEEL also reported that Sony Group had sought termination fees amounting to US $90 million. 

“The company is evaluating all available options and basing 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,” ZEEL said.

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