Connect with us


Sony ends $10 billion deal to merge India assets with Zee, plans legal action



© Reuters. FILE PHOTO: Zee Entertainment and SONY logos are displayed in this illustration taken, September 1, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Nishit Navin and Chris Thomas

BENGALURU (Reuters) -Japan’s Sony (NYSE:) Group on Monday scrapped plans for a $10 billion merger between its Indian unit and Zee Entertainment which said it had been accused of breaching their agreement and that the case was set to go to arbitration.

The collapse of the deal intended to create a media powerhouse creates more uncertainty for TV broadcaster Zee in particular at a time when competition is heating up. Disney is seeking to merge its Indian businesses with the media assets of billionaire Mukesh Ambani’s Reliance.

Sony said in a statement it had engaged in “good faith discussions” to extend the end date to complete the deal but the companies were unable to agree upon an extension by their Jan. 21 deadline.

“After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied … We remain committed to growing our presence in this vibrant and fast-growing market,” it added.

Sony is seeking $90 million in termination fees and emergency interim relief and plans to “invoke arbitration”, Zee said in a statement.

Zee added that it refutes all claims made by Sony and would take appropriate legal action. It also said it had proposed an extension of up to six months to complete the deal but that was not accepted by Sony.

Although Sony did not specify on Monday what conditions were unfulfilled, a stalemate over who will lead the combined company had put the merger in danger.

Zee had proposed that CEO Punit Goenka take the helm, but Sony balked after he became the subject of an investigation by India’s market regulator. Zee said on Monday, however, that Goenka had been “agreeable to step down in the interest of the merger”.

Last year, the Securities and Exchange Board of India barred Goenka from holding directorships at any listed company, accusing him of being involved in diverting Zee’s funds to the group’s other listed entities.

Goenka denied the allegations. An Indian tribunal lifted the ban on him in October but said he would have to cooperate with any investigation by the regulator.

Goenka, who was in India’s Ayodhya city to attend the grand opening of a Lord Ram temple, wrote on X that he sees the Sony deal collapse as “a sign from the Lord”, adding he would move forward by strengthening his company for his stakeholders.

Zee is currently contending with declines in profits, advertising revenue and cash reserves. Its cash reserves fell to 2.48 billion rupees in the six months ended Sept. 30 compared with 5.88 billion rupees a year earlier.

Sony said it did not expect any material impact from the termination to its estimates for the year ending in March as it did not factor in the deal to its outlook.

The stock market was closed on Monday for a public holiday in Maharashtra state.

Read the full article here