On 22nd January (Monday), Sony Group officially informed Zee Entertainment Enterprises Ltd. of its decision to call off the merger with its India unit, as reported by Bloomberg.
As per the report, the Japanese entertainment giant sent a termination letter to Zee early on Monday. It is expected that it will disclose the same to the exchange later. Sony Group has claimed that the closing conditions for the deal have not been met and citing this reason, it called off the merger deal worth $ 10 billion.
In a statement, Sony said, “The merger did not close by the end date as, among other things, the closing conditions to the merger were not satisfied by then. Sony Pictures Networks India Private (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. As a result, on January 22, 2024, SPNI issued a notice to ZEEL terminating the definitive agreements.”
While the definitive agreements allowed both parties to extend the closing deal in good faith, it also provided that if the parties were unable to agree on an extension by the end of the discussion period, any party could terminate the definitive agreements by providing written notice.
Meanwhile, Sony refrained from commenting, and Zee did not respond immediately to Reuters’ request for a statement.
Earlier on Friday (19th January), Zee had stated that it was committed to the merger and was working to close the deal through “good faith negotiations”. In line with that, it sought to discuss an extension to a 20 January deadline to close the merger deal.
The agreement was seen as essential for the companies’ survival in an intensely competitive market, particularly in light of the upcoming merger between Disney’s Indian operations and the media assets of billionaire Mukesh Ambani’s Reliance Industries.
Notably, Sony’s India unit and Zee Entertainment had announced a merger deal over two years ago. However, the merger deal faced challenges over the leadership dispute about who would lead the combined entity. The challenges were further aggravated when the financial regulator Securities and Exchange Board of India (SEBI) launched a probe into Zee chief executive officer Punit Goenka.
The impasse over leadership had effectively derailed the deal which had aimed to establish a $10 billion media powerhouse that would have been capable of competing with global giants like Netflix Inc. and Amazon.com Inc.
Sony issued the termination letter after the lapse of a 30-day grace period over the weekend. Throughout this duration, the two parties were unable to agree on a deadline set in late December. In June, the Mumbai-based media house was accused by SEBI of falsifying loan recovery to hide private financing deals orchestrated by its founder, Subhash Chandra. SEBI’s interim order alleged that Chandra and his son, Goenka, had “abused their position” and misappropriated funds.
Despite Goenka securing relief from an appellate authority against the SEBI order, preventing him from holding an executive or director position in a listed company, Sony continued to view the ongoing investigation as a persistent corporate governance issue.
