Sony-Zee merger called-off

Sony-Zee merger called-off
Sony-Zee merger called-off

Sony Group Corporation has ended its more than two-year attempt to merge its TV and streaming businesses in India with local giant Zee Entertainment Enterprises Limited (ZEEL).

In a statement, issued Monday, Sony Group said: “The merger did not close by the end date as, among other things, the closing conditions to the merger were not satisfied by then. [Sony Pictures Networks India] 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.”

A separate statement from Sony in India informed. “Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date,” it said. “We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences.”

Sony Group’s statement also said that it “does not anticipate any material impact on its consolidated financial results as a result of the termination of the definitive agreements for the merger.” But it seems likely that there could still be some price to pay.

Sony may have had to pay Zee a $100 million termination fee as part of the original agreement, but this may no longer be the case as the penalty cause has expired. But there is still the risk that they could be sued by Zee or its shareholders. Meanwhile, according to a statement from ZEEL, Sony is seeking a termination fee of $90 million, “on account of alleged breaches by ZEEL of the terms of [merger cooperation agreement], invoking arbitration and seeking interim reliefs against ZEEL. ZEEL categorically denies all the assertions raised by [Sony vehicles] Culver Max and BEPL on the alleged breaches under the terms of the MCA, including their claims for the termination fee.”

“ZEEL’s Board of Directors is evaluating all the available options. Basis the guidance received from the board, ZEEL will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings,” the statement added. “ZEEL has displayed utmost commitment towards the merger by undertaking several permanent and irreversible steps, resulting in one time and recurring costs for ZEEL. Despite this, the company will continue to evaluate organic and inorganic opportunities for growth, leveraging the intrinsic value of its assets.”

The combination of ZEE and Culver Max Entertainment, formerly Sony Pictures Networks India, would have been worth $10 billion and put more than 70 linear TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), under a single roof. That would have made it the largest player in the country’s still significant linear TV market and bolstered its position in the Indian streaming sector where consolidation is now under way.

The deal was first proposed in 2021 and formalized in December that year, ahead of a process of regulatory and other approvals. The timeframe set by the two companies for completion of the deal expired on Dec. 21, 2023, but was extended by a month.

The deal was eventually approved by fair trade regulator CCI, stock markets NSE and BSE, shareholders and creditors of the company and the Mumbai bench of the National Company Law Tribunal.

January 22, 2024