After more than two years, Sony Group Corporation has abandoned its merger of streaming and TV divisions with the Indian industry’s largest company, Zee Entertainment Enterprises Limited (ZEEL).
The closing conditions to the merger were not completed by the End Date, which is one of the reasons the merger did not conclude by that date, according to a statement from Sony. Although Sony Pictures Networks India Private Ltd (SPNI) has been in good faith discussions to extend the End Date, the Discussion Period has ended without an agreement to do so. Consequently, SPNI terminated the definitive agreements with ZEEL by notification dated January 22, 2022. They added, “We remain committed to expanding our footprint in this dynamic and rapidly expanding market and providing Indian audiences with top-notch entertainment.”
Major Reason for the Termination of the Merger:
The Securities and Exchange Board of India (SEBI), the market watchdog, had banned Punit Goenka from holding a directorship in the Zee Group. However, on October 30, 2023, the Securities Appellate Tribunal (SAT) granted him a reprieve, reversing the ban. Despite this, a regulatory investigation into allegations of fund diversion is still ongoing.
Given its corporate governance practices, Sony has found this regulatory burden unsettling, according to analysts following the transaction. Goenka has objected to the company’s promotion of its India MD & CEO, NP Singh, to the top position.
Zee had requested a deadline extension on December 20, which was set to expire on January 20, even though the agreement was supposed to be completed by December 21 of last year. The merger agreement reached in December 2021 contained this 30-day grace period.
The Japanese conglomerate stated, “The definitive agreements provided that 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 if the merger did not close by the date 24 months after their signature date.”
The merger did not close by the deadline since the closing requirements had not been met by then. Although SPNI has been in good faith talks to extend the deadline, the negotiation time has ended without an agreement to do so, according to the statement.
“Consequently, SPNI terminated the definitive agreements with ZEEL by notice dated January 22, 2024. As stated on November 9, 2023, Sony has not factored the merger’s effects into its forecast for consolidated financial results for the fiscal year ending March 31, 2024. The company also does not expect the termination of the merger agreements to have a material impact on its consolidated financial results.
Zee reaction after Sony Issued Termination Notice:
After Sony Group, based in Japan, submitted an official notice to terminate the long-pending merger pact between Zee and Sony, Zee Entertainment Enterprises Ltd. (ZEEL) announced that it will be pursuing legal action against Sony Group. The $10 billion deal had been beset by several problems, leadership disputes, and intervention from the Securities and Exchange Board of India (SEBI). As per ZEEL’s filing on the exchanges, the legal action was a reaction to a notification that was received earlier today by Culver Max Entertainment Pvt Ltd (formerly known as Sony Pictures Networks India) and Bangla Entertainment Pvt Ltd, requesting a termination fee of $90 million.
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