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regular-article-logo Wednesday, 22 May 2024

Sony India scraps merger with Zee Entertainment, seeks USD 90-million break-up fee

Though Sony did not offer the reasons behind its decision to end the deal, one sticking point during the negotiations was on choosing the merged entity’s leader. While Zee was pitching for Goenka, Sony was uncomfortable with the choice given the allegations of fund diversion against him by Sebi

Our Special Correspondent Mumbai Published 23.01.24, 10:01 AM
Representational image

Representational image File picture

The Sony group scrapped plans for a $10-billion merger of its Indian unit with Zee Entertainment Enterprises Ltd, stating the closing conditions to the deal
could be not satisfied.

On Monday, the Japanese conglomerate also sought a $90-million break-up fee from Zee, which threatened legal action as the deal petered out more than two years after the initial announcement of the merger.

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Sony’s announcement came on a day Zee managing director and CEO Punit Goenka was attending the consecration ceremony at the Ram temple in Ayodhya.

“As I arrived at Ayodhya early this morning for the auspicious occasion of Pran Pratishtha, I received a message that the deal that I have spent 2 years envisioning and working towards had fallen through, despite my best and most honest efforts.

“I believe this to be a sign from the Lord. I resolve to move ahead positively and work towards strengthening Bharat’s pioneering M&E Company, for all its stakeholders,’’ Goenka said on the micro-blogging platform X.

The one-month grace period for extended negotiations to complete the merger ended on January 20.

Sony Group Corporation said in a statement its arm Sony Pictures Networks India Pvt Ltd (SPNI) on Monday issued a notice terminating the definitive agreements entered by the parties on December 2021.

According to Sony, the deal terms stipulated if the merger did not close within 24 months after their “signature date” or the end date, the parties are
required to discuss in good faith an extension of the end date by a reasonable period of time.

It disclosed that such discussions were required to be held for 30 days after the end date.

If the parties are unable to agree upon such an extension by the end of the discussion period, either of them could terminate the merger.

“The merger did not close by the end date as, among other things, the closing conditions to the merger were not satisfied by then.

“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 Zee terminating the definitive agreement,’’ it said.

Though Sony did not offer the reasons behind its decision to end the deal, one sticking point during the negotiations was on choosing the merged entity’s leader.

While Zee was pitching for Goenka — as per the merger agreement signed in 2021 — Sony was uncomfortable with the choice given the allegations of fund diversion against him by market regulator Sebi.

Sony had reportedly suggested its India CEO N.P. Singh lead the merged company.

Goenka later agreed not to be the CEO of the merged entity.

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