Zee-Sony merger: January 20 deadline sparks last-minute negotiations, what’s at stake
With just a day to go for the big day, concerns are rising that a failure to meet the January 21 deadline may jeopardize the deal.
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On December 17, 2023, Zee Entertainment Enterprises Limited (ZEEL) wrote to Culver Max Entertainment Private Limited formerly known as Sony Pictures Networks India Private Limited) (CMEPL) and Bangla Entertainment Private Limited (BEPL), seeking an extension on merger deadline, initially set for December 21, 2023.
On December 20, Zee informed in a regulatory filing that Sony has agreed to discuss an extension of the date.
Cut to January 19, exactly a day before the new extended deadline, industry insiders said, “Good faith negotiations are still ongoing between both parties.”
Stakeholders are eagerly awaiting the conclusion of the $10 billion merger, placing their hopes on these last-minute negotiations.
However, with just a day to go for the big day, concerns are rising that a failure to meet the January 21 deadline may jeopardize the deal.
These concerns remain speculative, much like previous speculations suggesting an acquisition route for the merger, Sony’s steadfastness on leadership and Punit Goenka's readiness to step aside from the top role in the merged entity.
But what actually happens if the deal doesn’t go through?
Sandeep Bajaj, Advocate, Supreme Court of India explained.
“The potential cancellation of Zee-Sony mega-merger throws a curveball at the Indian media scene. If Sony pulls out, Zee might fight back in court, claiming a breach of contract and/or unfair business practices. This could trigger messy legal battles, adding another layer of complexity to the already tangled situation,” Bajaj said.
“Both companies have already sunk a significant amount of money into litigation and due diligence. If the deal falls through, depending on the agreement's specifics, there might be claims for compensation to recoup those expenses,” he added.
The deal appears to be snagged on disagreements about who will lead the merged company, specifically concerns surrounding ZEEL MD and CEO,Punit Goenka.
Under the initial merger agreement, Zee Entertainment's Punit Goenka was set to become the MD and CEO in the merged entity, with SPNI holding 50.86 percent, Zee's promoters 3.99 percent, and 45.15 percent for public shareholders. However, in August 2023, after NCLT (National Company Law Tribunal) approved the merger, SEBI (Securities and Exchange Board of India) prevented Goenka and his father from leadership roles in listed entities. SAT (Securities Appellate Tribunal) later overturned SEBI's decision on October 30, allowing Goenka to hold managerial positions in listed companies.
But Sony did not want to budge from their decision of not having Goenka at the helm of the new company citing regulatory reasons.
Most experts however argued that the merger cannot go through without putting Goenka at the helm of the new company because any other alternative would mean not honouring the merger scheme.
No one can afford for the merger to fail, they said.
“The deal is crucial for both entities considering talks between Disney and RIL and considerable market share at stake in the Indian media landscape, the merger would bring about greater market presence and competition, greater financial strength as well as having an expanded and diverse content portfolio,” said Suhael Buttan, Counsel at SKV Law Offices.
