The Sony Group Corp has terminated the $10 billion merger of its India unit with Zee Entertainment due to a leadership stalemate.
The entertainment giant sent a termination notice to Zee on the deal, which was announced more than two years ago.
It is seeking $90 million as break-up fees for violating the terms of the merger pact and “invoking arbitration”, which ZEEL said it will contest legally.
The reason
The deal 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.
Zee insisted that Goenka would lead the new entity as agreed in the 2021 pact. Sony was wary of his appointment given the regulatory probe against him, Bloomberg reported.
The probe
The Securities and Exchange Board of India (Sebi) claimed in June that Zee faked the recovery of loans to cover private financing deals by its founder, Subhash Chandra.
While Goenka got a reprieve from an appellate authority against the Sebi order, Sony viewed the ongoing probe as a corporate governance issue.
Bad for both
Zee incurred Rs 366.59 crore in compliance expenses by September 2023, coupled with the collapse of the merger. It is also likely to jeopardise its four-year cricket broadcasting rights agreement with Disney’s Star.
The failed merger compels Sony to reassess its India strategy as it loses access to Zee’s diverse content library and television channels. It will impact its market presence and plans in India.
Why this deal mattered?
The deal had won approval from regulators in August last year. It would have created a $10 billion entertainment entity.
Sony was set to own a 50.86% stake, with the Goenka family holding 3.99%.
Had it been completed, the deal would have been the largest deal in India’s media and entertainment sector.
It could have created an entity with over 100 channels and two prominent OTT platforms, challenging players such as Disney Star, Netflix, and Amazon Prime.
