Zee Entertainment Mulls Legal Action as Deadline Nears for Sony Merger, Possible Dissolution Raises Stakes

Newseense January 17, 2024

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Zee Entertainment Mulls Legal Action as Deadline Nears for Sony Merger, Possible Dissolution Raises Stakes

In a high-stakes turn of events, Zee Entertainment Limited (ZEEL) is contemplating legal action against Culver Max Entertainment (Sony India) if the much-anticipated merger, slated for completion by January 20, fails to materialize, according to reports.

Sources within the company have disclosed to Hindu Businessline that Zee was compelled to shutter certain lucrative ventures to comply with the merger conditions set by the Competition Commission of India (CCI). Failure at this juncture would incur significant losses for Zee, prompting the exploration of legal avenues.

“For the merger, both Zee and Sony had to comply with certain voluntary structural remedies proposed by CCI. For this, Zee had to divest three Hindi channels, Big Magic, Zee Action, and Zee Classic. If the merger fails to go through, this is a loss for Zee,” revealed an insider.

The deal, inked between Zee Entertainment and Sony Pictures Networks India in 2021, had a stipulated two-year completion period before December 21, 2023. The original agreement included a provision for $100 million in penalties if either party withdrew, but this clause expired on December 21. With talks extended by 30 days, both parties are striving to finalize the deal ahead of the looming January 20 deadline.

As the agreement’s penalty clause has lapsed, Sony may escape financial consequences if it opts to dissolve the agreement. Culver Max Entertainment (previously Sony Pictures Networks India) and ZEEL entered a non-binding term sheet in 2021 to merge their linear networks, digital assets, production operations, and program libraries.

Recent reports from Bloomberg indicate that Sony is considering calling off the $10 billion merger due to discomfort with Pawan Goenka leading the merged entity. The discomfort arises from multiple regulatory probes involving Goenka. The proposed merger received regulatory approvals from the Competition Commission of India (CCI), NSE and BSE stock exchanges, as well as shareholders and creditors.

Sony’s reported troubles stem from Goenka’s regulatory issues with the Securities and Exchange Board of India (SEBI). Initially agreeable to stepping aside for Sony India head NP Singh, Goenka’s stance changed after temporary relief from the Securities Appellate Tribunal (SAT) regarding the SEBI investigation. Goenka now insists on adhering to the original terms of the agreement.

Shares of Zee Entertainment were trading at Rs 255.80 at 9.30 am on Wednesday, reflecting a 0.93 percent increase from the previous close. As the January 20 deadline approaches, industry watchers remain on edge, awaiting the resolution of this high-profile merger saga.

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