Confirming the speculations, Sony Pictures Network India officially announced on January 22 the termination of the 10-billion USD merger deal with Zee Entertainment Enterprises Limited (ZEEL). The decision was communicated through a notice issued to Zee, formally calling off the agreement that had been inked on December 22, 2021. This merger was intended to combine ZEEL with Culver Max Entertainment Private Limited (CME), previously known as Sony Pictures Networks India Private Limited.
Sony expressed disappointment in a statement, citing failed attempts to reach an agreement and extend the end date under the merger cooperation agreement. The company said that despite more than two years of negotiations, the closing conditions for the merger were not met by the specified deadline.
According to Sony’s statement, the definitive agreements outlined provisions for discussions to extend the end date beyond 24 months from the signature date. However, the parties were unable to reach an agreement by the stipulated deadline, leading to the termination of the merger deal. Sony emphasized that the failure to close the merger was due to unmet closing conditions.
The impact of the terminated merger was not included in Sony’s consolidated financial results forecast for the fiscal year ending March 31, 2024. The company asserted that it does not anticipate any material impact on its financial results as a result of the termination, emphasizing its commitment to growing in the Indian market.
Contrary to Sony’s allegations, Zee Entertainment denied any breaches of the Merger Cooperation Agreement (MCA) and asserted that it had followed all necessary steps and efforts in line with the agreement, as approved by shareholders and regulatory authorities.
Zee revealed that Sony is seeking a termination fee of 90 million USD, alleging breaches by ZEEL of the MCA. In response, Zee categorically denied all assertions made by Culver Max and Bangla Entertainment Pvt Ltd (BEPL), stating that its Board of Directors is evaluating available options. The company expressed its commitment to protecting the long-term interests of stakeholders and stated that it would take necessary legal actions, contesting the claims raised in arbitration proceedings.
Zee also detailed the negotiation attempts during the 30-day period stipulated in the MCA. Despite efforts, consensus could not be reached on purported pending conditions precedent that required action on the part of both ZEEL and Culver Max, BEPL. Zee’s MD and CEO, Punit Goenka, reportedly expressed willingness to step down in the interest of the merger, proposing modifications to the scheme, including an extension of up to six months for the transaction’s consummation. However, Sony chose termination over further negotiation, the company said.
Zee had sought an extension to resolve the matter of Punit Goenka’s leadership in the merged entity, a clause in the merger deal. Initially supported by Sony, Goenka was involved in a regulatory probe last June by the Securities and Exchange Board of India (Sebi) that accused Zee of deceptive practices related to loans and fund diversion. Sebi barred Goenka from executive roles, but the ban was overturned by the Securities Appellate Tribunal in October, leading to his reinstatement as ZEEL’s managing director. Sony was not willing to appoint Goenka as CEO of the merged entity, citing an ongoing regulatory probe against him while Zee wasn’t ready to have anyone else in that position.