The news about the termination of the Sony-Zee merger is baseless and factually incorrect: Zee Entertainment

Zee-Sony Merger Deal: Zee Entertainment Limited on Tuesday clarified that the news and rumors that the multi-dollar merger between Zee Entertainment and Sony's Indian arm will be completed before January 20 are baseless and factually incorrect. Bloomberg news agency reported on Monday that Sony plans to call off the $10 billion merger and Sony will issue a termination notice before January 20.

Bloomberg reported that Sony was no longer interested in the deal with Punit Goenka to head the new company amid ongoing regulatory investigations.

“This relates to (i) the letter dated January 9, 2024 with reference number NSE/CM/Surveillance/13787 received by us from the National Stock Exchange of India Limited; and (ii) an email dated January 9, 2024 with reference number L.” /SURV/ONL/RV/KS/ (2023-2024)/ 78 received from BSE Limited on the message headed “Sony is about to the termination of the $10 billion merger with Zee: The inside story of what went wrong over two years” In this context, we would like to clarify that the above article is baseless and factually incorrect. “We would like to reiterate that the Company is committed to the merger with Sony and continues to work toward the successful completion of the proposed merger,” the company said in a regulatory filing.

It further added, “We would also like to note that the company has always complied with its obligations under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Rules, 2015 and will continue to make disclosures in accordance with such rules.”

In September 2021, Sony Pictures Networks India and ZEEL agreed to merge their linear networks, digital assets, production operations and programming libraries. The combined company would have more than 70 television channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), establishing itself as the largest entertainment network in India.

On Monday, Business Today reported that the $10 billion merger deal between Sony and Zee was still in the works and was 50:50.

It should be noted that the Sony-Zee deal includes a $100 million breakup fee, which is commonly used in acquisition agreements to put pressure on the seller and discourage it from backing out of the deal. The merger agreement allows Zee and Sony to extend the deadline for completing the merger three times. However, should Sony decide to terminate the deal, Sony will have to pay a termination fee of $100 million to Zee.

The source told Business Today that “dealing with the multinational bureaucracy is proving difficult on some issues.”

“There are problems and a way has to be found. The law cannot be overtaken by perceptions.”

It was decided that the Sony Group would nominate the majority of the board of the merged company. This board would include current MD and CEO of SPNI, NP Singh. However, there were concerns over the future of the merger after Sebi took action against Chandra and Goenka over diversion of ZEEL's funds.

The tie-up between ZEEL and sector regulators, including the Competition Commission of India, has received shareholder approval.

Earlier in the day, shares of Zee Entertainment fell 10 percent to Rs 249.75 on the BSE after the news broke. At around 1.40 pm, the shares were trading at Rs 262.10 apiece on the BSE, down nearly 6 per cent.

Emkay Global Financial's research report on Zee Entertainment stated that the collapse at this stage may be a setback for both Sony and Zee. “We believe that the merger, if it does not go through, will be a losing proposition for both parties, especially given competition from a much larger Reliance-Disney entity (if the merger goes through). Both parties may have to recalibrate their strategies from ground zero, which would be a major challenge,” the report said.

Also Read: Sony-Zee merger deal is balanced, it includes $100 million break-up fee: sources