Sony is planning to officially send a termination notice to Zee by this month end, maybe as early as January 22nd, said two people aware of the matter, unless Zee relents on key clauses.
Sony Group Corp is close to calling off its proposed $10 billion merger between its India operations with Zee Entertainment – first announced two years ago in a bid to create India’s largest broadcast company — owing to what it sees as the inability of the latter to fulfill several conditions laid down in the merger agreement, two people aware of the development said.
The two parties are yet to come to an agreement over Zee Entertainment and CEO Punit Goenka leading the merged entity after Sony expressed concerns after market regulator Sebi barred him from holding managerial posts in Zee and any of the entities in a fund-diversion case.
Though the Securities and Exchange Board of India order was stayed by the Securities Appellate Tribunal, Sony is not comfortable with Goenka leading the merged entity due to the stringent corporate governance policy in Japan. The contentious issue is not just over Goenka leading the merged entity, but the completion of the deal also depends on how the Indian firm is able to meet the other closing conditions, said an industry source.
The deal had already received regulatory approvals, including clearance from the Competition Commission of India (CCI), and was to be completed before December 21, 2023. By January 21, the grace period of one month to complete the transaction will end.
Earlier in September 2021, then Sony Pictures Networks India and Zee entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations and programme libraries. The combined entity will own over 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.
Subsequently, the two parties signed a definitive agreement for their merger in December 2022. The majority of the board of directors of the combined entity would be nominated by the Sony Group and include the current SPNI Managing Director and CEO NP Singh.
However, questions over the future of the merger arose after Sebi’s actions against Goenka for siphoning off funds of Zee.
Sources: The Indian Express, The Economic Times
