While the deal collapsed primarily due to a disagreement over who would be the managing director and chief executive of the joint entity, other factors also played a role, suggest the communication between the companies. In its deal termination notice, Sony-owned Culver Max Entertainment claimed multiple breaches by Zee, some of which “uncurable”, of the December 22, 2021 merger cooperation agreement (MCA).
Sony rejected Zee’s proposal for a six-month extension to the deal closure deadline after the end of one month of good faith negotiations on January 21. For this, it cited Zee’s inability to provide a clear timeline to complete outstanding issues that were a must to conclude the merger, as per the email exchanges seen by ET.
Sports-related exceptions: Zee
The MCA breaches, according to Sony, included a decline in Zee’s operating profit below the agreed ₹1,555 crore, non-disclosure of certain pending investigations, signing of a deal with Disney Star for International Cricket Council TV rights without Sony’s consent, and venturing into a new business by launching a TV channel in South Africa. Sony claimed that Zee’s ₹3,370 crore commitment in bank guarantees and deposits to Disney Star for the ICC TV rights, along with its existing debt of ₹3,007.5 crore, had resulted in its binding debt exceeding ₹3,750 crore, which was a violation of the MCA, as per the documents. In response, Zee termed Sony’s conduct in raising the ICC issue “belatedly” as reprehensible and unfortunate, stating that the MCA had sports-related exceptions. It deemed Sony’s request for provisioning losses on ICC TV rights as against industry accounting norms. The Punit Goenka-led company said Sony was aware that Zee would not be able to meet the ₹1,555 crore Ebitda criteria and questioned its motives for raising the issue at a late stage of the deal. It defended the Zee Zonke launch in South Africa, terming it a normal product launched in the ordinary course of the business.
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