Sony Terminates Merger, Zee Weighs Options

The Sony Group confirmed that its India unit has terminated its agreement to merge with Zee Entertainment Enterprises Ltd.

Sony Pictures Networks India Pvt., now called Culver Max Entertainment Ltd., a wholly-owned subsidiary of Sony Group Corp., on Monday issued a notice terminating the definitive agreements entered with Zee, according to its statement.

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

The key contention has been if Punit Goenka would lead the combined entity. SEBI had barred him from holding a key managerial position over alleged fund diversion. While he won relief from the Securities Appellate Tribunal, the regulatory scrutiny continues.

Sony said it has been engaged in discussions "in good faith" to extend the deadline but the discussion period has expired without an agreement.

The Japanese entertainment giant's move was first reported by Bloomberg.

The definitive agreements, signed in December 2021, provided either party the option to terminate the deal by providing written notice if they are unable to agree upon such an extension by the end of the discussion period of two years.

Zee said the Sony Group has invoked arbitration and sought a termination fee of $90 million on account of alleged breaches of the deal. Zee "categorically denies" it and is evaluating all available options, it said.

The company said Goenka had agreed to step down in the interest of the merger and it proposed a six-month extension to complete the transaction but the proposal did not get Sony's response.

Zee has consistently worked towards the implementation of the scheme in the interest of the shareholders, the company said in an exchange filing, hours after Sony's announcement.

"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," it said.

Goenka said the falling apart of the Sony-Zee deal is a "sign from the Lord (Ram)" in a post on social media platform X, formerly Twitter. He is in attendance at the Ayodhya Ram Temple consecration ceremony.

"I resolve to move ahead positively and work towards strengthening Bharat’s pioneering M&E Company, for all its stakeholders," he said.

Earlier this month, there were reports that Sony Group's India unit was looking to cancel the deal due to a standoff over whether Goenka would lead the merged entity.

Sony planned to file the termination notice before a Jan. 20 extended deadline for closing the deal, saying some of the conditions necessary for the merger had not been met, the report claimed.

Later , Zee put out a statement refuting the reports about Sony Group cancelling the proposed merger with its Indian subsidiary were "baseless and factually incorrect".