The Sony-Zee agreement aimed to establish India’s largest entertainment company, equipped with the financial strength to compete against global giants like Netflix Inc. and Amazon.com Inc. Additionally, it would position itself against local conglomerates such as Reliance Industries Ltd, currently in talks with Disney.
ET had reported on Jan 21 that Sony Group Corp is unlikely to extend the good faith negotiations with Zee Entertainment Enterprises Ltd. (ZEEL) — whose deadline was supposed to lapse on the midnight of January 21st.
Earlier, Zee had asked Sony to push back the deadline of December 21, 2023, for the merger which was inked on December 22, 2021.
In December 2021, Sony and Zee had signed definitive agreements to merge. Sony was to indirectly hold a majority of 50.86% of the combined company; the founders of ZEEL would hold 3.99%; and the other ZEEL shareholders were to hold a 45.15% stake. The deal was anticipated to conclude in 8-10 months. However, two years down the line, it remained incomplete due to regulatory investigation and legal suits, among other things, involving Zee and its promoters including MD & CEO Punit Goenka.
“Sony Pictures Networks India Private Ltd. (“SPNI”) (now known as Culver Max Entertainment Limited), a wholly-owned subsidiary of Sony Group Corporation (“Sony”), today issued a notice terminating the definitive agreements entered into by SPNI and Zee Entertainment Enterprises Ltd. (“ZEEL”) relating to the merger of ZEEL with and into SPNI (the “Merger”), which was previously announced on December 22, 2021,” the company said in a statement.The agreements said that if the merger didn’t happen within 24 months after they were signed (called the “End Date”), the parties had to talk about extending this End Date in a fair way. They needed to have these discussions for a month after the End Date (called the “Discussion Period”). The agreements also said that if, by the end of the Discussion Period, they couldn’t agree on an extension, any party could end the agreements by sending a written notice.The merger didn’t happen by the End Date because certain conditions needed for the merger to be completed were not met by then, Sony said.
“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,” the company said.
If the deal was finalized, it would have contributed to the expansion of Sony’s media business in the world’s most populous country and a fast-growing market. Sony would boast over 75 television channels, securing a market share of 37%, surpassing Disney-owned Star’s 24%, as per Motilal Oswal Financial Services Ltd. The Sony-Zee alliance would have entered into direct competition with the impending Reliance-Disney joint venture, creating a near-duopoly scenario.
Reports of likely termination of the merger deal had started coming in from early this January, but Zee had denied such speculations and hoped that the merger would go through.
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 had contributed to the ongoing dissatisfaction among the potential partners, ET repoted earlier. They also didn’t reach an agreement on appointing ZEEL MD Punit Goenka as 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. Currently, the Goenka family holds 3.99% equity in ZEEL, with the remaining shares owned by public and institutional stakeholders.
Insiders at Sony had revealed that the multinational has proposed offering Goenka the position of an advisor at the new company. However, Sony suggested that he should not be part of the board until regulatory investigations are concluded.
Sony wanted NP Singh, its India MD and CEO, to assume the role of chief executive for the new entity temporarily. This would be the case unless Goenka is cleared of all pending cases.
Sony today said it has not included the impact of the Merger in its consolidated financial results forecast for the fiscal year ending March 31, 2024, which was announced on November 9, 2023, and does not anticipate any material impact on its consolidated financial results as a result of the termination of the definitive agreements for the Merger.
