On Monday, Sony Group Corp terminated its proposed $10 billion merger — first announced in December 2021 — between its India operations and Zee to create the largest media giant in the country. Following the development, at least 6 institutional shareholders cumulatively owning over 30 per cent of ZEEL are believed to be planning to approach the board and stock market regulator SEBI in the next week, to call an extraordinary general meeting (EGM) of ZEEL and seek the removal of ZEEL chairman R Gopalan and Punit Goenka, CEO and MD of the company.
Over 350 ZEEL retail shareholders too are planning to join forces and write to SEBI seeking its intervention to protect their shareholder rights. Sources said, a GST dispute over Rs 850 crore and advances to the tune of Rs 1,400 crore made towards content have also come under regulatory scanner.
Last August, the Sony-Zee deal hit a hurdle after SEBI banned Goenka and his father Subhash Chandra from the board of any listed company for a year, for allegedly diverting funds from Zee and the group’s other listed entities to founding shareholders. The SEBI order was overturned by the Securities Appellate Tribunal (SAT) in October 2023.
SEBI spokesperson said the regulator will not comment on individual cases. ZEEL and Sony Global spokespersons did not respond to ET’s queries.
As on December 2023, Goenka family as promoters own 3.99% of the company while public shareholding stood at 96.01%. Of this Indian mutual funds and insurance companies including LIC together own 44%. Key domestic shareholders also include ICICI Prudential Value Discovery Fund which owns 7.25%, Nippon Life India 6.12%, HDFC asset management has a 5.25% block while HDFC Life Insurance has a 1.85%. “Several domestic and foreign institutional and retail investors are rallying together for an EGM to oust the incumbent chairman and Goenka for failing to successfully complete the merger,” said a person aware. “Unlike Dish TV, in ZEEL the board members perceived to be close to the Goenka family have been voted out. The new ones are yet to be voted in through a shareholder vote.”In December, two independent directors Vivek Mehra and Sasha Mirchandani’s reappointment proposals were defeated after they failed to get approval from 75% of shareholders. Another independent director, Adesh Kumar Gupta, was to retire by rotation, so the resolution proposing his reappointment became infructuous during the 41st AGM. Deepu Bansal, a Chartered Accountant and Senior Partner in NDB & Associates LLP, Chartered Accountants was appointed as an independent director. Three new independent directors, Venkata Ramana Murthy Pinisetti, Shishir Babubhai Desai and Uttam Prakash Agarwal were appointed as independent directors with effect from 17 December 2023. “Barring Bansal, the other three need to be voted in by the shareholders. That has not happened yet,” said an official in the know. So this is very different from Dish TV,” said the person mentioned above. Sony though not keen on a hostile takeover attempt is open to closing the merger if shareholders ask them to. As on Monday 22nd, no institutional or retail investors has officially reached out to them, said sources close to the company. But the Japanese media conglomerate is not willing to give the Goenka’s any non-compete fee or agree on the earlier clause that allowed them to rachet up their stake in the merged company.
ET on January 21st was the first to report that Sony was extending the good faith negotiations with Zee and would be sending a formal communication to the Tokyo stock exchange officially terminating the merger.
Earlier on Monday, Sony Corp officially informed the exchanges that the “merger did not close by the End Date as, among other things, the closing conditions to the Merger were not satisfied by then.”
ET on January 9th was the first to report Sony chose not to continue with the negotiations for the lapses by Zee in complying with what are called conditions precedents (CP) in legalese and for the failing financial health of Zee Entertainment.
This has been adding to the simmering discontentment between the suitors, who thus far couldn’t agree on ZEEL MD Punit Goenka being the CEO of the merged entity, until he’s cleared of charges that he siphoned off money from the publicly-traded firm to closely held companies owned by his family’s Essel Group.
People close to Sony said the multinational has offered Goenka the role of advisor at the new company, but said he should not be on the board, pending regulatory investigations.
Sony has been rooting for NP Singh, its India MD and CEO, as chief executive of the new entity in the interim, unless Goenka is exonerated in all pending cases.
On January 19th ET was also the first to report that Sony Group Corp has called for a board meeting last Friday, where it’s expected to take a call on the merger and that a likely termination was expected as early as Monday January 22nd or January 23rd.
Some were expecting a last minute breakthrough even though in reality even if Goenka had agreed to step down on January 19, the various CPs would have to be audited, and final adjustments made to the company’s finances. Since the merger was announced, Zee’s net profit has plummeted to Rs 48 crore in FY23, from Rs 956 crore in FY22 and Rs 793 crore in FY21.
“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,” it said on Monday and sought $90 million in termination fees and damages from ZEEL.
ZEEL while refuting all allegations said it is examining all options including legal ones against Sony.
