Yahoo Finance Sony Sends Termination Letter to Zee Over India Merger
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Sony Group Corp. and Zee Entertainment Enterprises Ltd. have officially called off a planned $10 billion media merger in India after two years of drama and delay, abandoning their effort to create an entertainment giant in Asia’s biggest streaming market.
The Japanese company sent a termination letter to Zee on Monday for failing to meet merger agreement conditions and is seeking $90 million in break-up fees, with the Mumbai-based Zee “categorically” denying that it had breached the pact.
The deal, which Bloomberg reported on Jan. 8 was headed for collapse, fell apart due to a stalemate over whether Zee’s Chief Executive Officer Punit Goenka would lead the merged entity amid an investigation by India’s capital markets regulator. With neither side willing to blink, both Sony and Zee now have to redraw their plans for the world’s most-populous country.
Read More: Sony-Zee Merger Risks Collapse Ahead of Deadline Over CEO Drama
Sony was expected to benefit from Zee’s deep library of content in regional Indian languages and dozens of local television channels. Zee’s in precarious financial health and will facing growing competition, as Reliance Industries Ltd. and Walt Disney Co. near their own merger.
Negative Impact
“This will have a negative impact on both parties, as both companies are going to face stiff competition from digital media and face a potential threat from the merger of Reliance and Disney,” said Karan Taurani, analyst at Elara Securities India. Zee leadership may also face pushback from investors for the failed merger deal, he added.
The termination letter from Sony came on Monday after a 30-day grace period ended over the weekend when the two sides couldn’t reach an agreement on a deadline set in late December.
The last-lap tussle over leadership was the single biggest hurdle for the deal — Zee was insisting that Goenka would lead the new entity as agreed in the 2021 pact, while Sony was wary of his appointment given the regulatory probe against him.
The Securities and Exchange Board of India alleged in June that the Mumbai-based media house faked the recovery of loans to cover private financing deals by its founder, Subhash Chandra. Chandra and his son, Goenka, “abused their position” and siphoned off funds, Sebi said in an interim order, barring Goenka from executive or director appointments in listed companies.
While Goenka got a reprieve from an appellate authority against the Sebi order, Sony viewed the ongoing probe as a corporate governance issue, Bloomberg reported earlier.
The collapsed deal, which had received almost all regulatory approvals, would have created an entertainment behemoth in which Sony was supposed to own a 50.86% stake, with Goenka’s family owning 3.99%.
--With assistance from Preeti Singh, Takashi Mochizuki, Peter Vercoe and Ashutosh Joshi.
(Updates throughout)
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