Inside Story: Did Zee find a better suitor before Sony walked off?
There has not been one but many obstacles in the $10 billion Zee-Sony merger. Starting from regulatory hurdles, shareholder issues, to leadership disputes. Some sources claim Zee deliberately created the last-mile hurdles to scuttle the deal and look for greener pastures.
A new ‘It's not you, it's me’ kind of break-up story is brewing in the media circuit. In relationship terms, this is a popular strategy to confuse one and draw attention away from the real reason for the end of a relationship.
A little less than a month ago, Quantum Securities' Sanjay Dutt sparked speculation with a cryptic post suggesting a done deal for ‘AMG’. Some decoded the ‘done deal’ as an arrangement in discussion between Adani and the Goenka on ZEEL (Zee Entertainment Enterprises). Insiders claim discussions are more concrete than gossip.
It seems there’s more to these insiders' claims. “Zee had its eyes set on a different suitor long before the marriage with Sony was called off,” an insider said. The innumerable roadblocks in the Zee-Sony merger allegedly prompted Zee to explore alternative partnerships long before Sony sent Zee the termination notice on January 22, bringing to an end two-years of talks and negotiations
A development that Zee MD Punit Goenka said was ‘a sign from the Lord’, as he wrote on X, formerly Twitter, from the Ram Mandir inauguration ceremony in Ayodhya. Goenka was on the state guest list that included the who's who of India Inc.
From temple to termination of merger
The path to the merger was a minefield of obstacles, starting from regulatory hurdles, shareholder issues, to leadership disputes. Some sources claim Zee deliberately created the last mile hurdles to scuttle the deal and look for greener pastures. This includes multiple requests for deadline extensions and not coming to an agreement on leadership of the new company. According to the initial agreement, Punit Goenka, CEO of Zee Entertainment Enterprises Ltd, was slated to assume the role of MD and CEO of the merged entity. However, Sony was pushing for its India MD and CEO, NP Singh, to become the CEO of the newly formed Zee-Sony company.
Counterclaims say Goenka even offered to step aside and work with Sony to look for a new head, but Sony refused.
Ultimately, it's a he-said-she-said situation. Both claims remain unconfirmed.
As per a Reuters report, e-mails exchanged between Sony and Zee highlighted how Zee did not sever ties with their Russian subsidiaries that dealt in content creation and distribution.
Ending ties with these subsidiaries were absolutely critical for Sony and the merged entity could under no circumstances inherit the Russian entities as per agreements, said the same report.
Zee’s claim as highlighted in the Reuters report was that the divestment process wasn't finished due to changing regulations in Russia, despite shutting down business there in December 2022.
Insiders claim all of these as ‘avoidable situations’.
Adani Group buying or joining forces with Zee will not be a surprise move given the former has been on a shopping spree in the media market for some time now.
Last year, Adani-owned entity AMG Media Network acquired a majority stake in NDTV. The company also increased its stake in the news agency IANS.
If Adani cracked a deal with Zee, its bouquet of offerings would be complete with a wire service, a news media company and an entertainment arm with over 70 channels. It is a wait and watch situation.
Meanwhile, legal recourse for the merger termination has begun.
Sony had initiated arbitration proceedings for an alleged breach of terms by Zee. In response, Zee initiated legal action to contest Culver Max and BEPL's claims at the Singapore International Arbitration Centre (SIAC).
Zee Entertainment called Sony's demand for $90 million in termination fees legally untenable and has also denied the breach of the merger agreement in response to Sony. Sony, however, encountered a setback as the emergency arbitrator denied any relief. Sony has said that it will continue to arbitrate against Zee before the SIAC.
All eyes are now on the March 12 National Company Law Tribunal (NCLT) hearing regarding Zee’s plea to enforce the stalled $10-billion merger with Sony Pictures Networks.
