Sony Group Corporation has terminated its more than two-year pursuit to merge its TV and streaming businesses in India with local giant Zee Entertainment Enterprises Limited (ZEEL).
The surprising move comes after a prolonged negotiation period, regulatory approvals, and issues concerning Zee’s valuation and leadership.
In a statement issued on Monday, Sony Group revealed that the merger failed to close by the specified end date due to unmet closing conditions. While Sony Pictures Networks India (SPNI) engaged in good-faith discussions to extend the end date, an agreement could not be reached, resulting in SPNI issuing a termination notice to ZEEL on January 22, 2024.
The termination, however, may not be without financial consequences. While Sony initially might have been liable to pay Zee a $100 million termination fee as part of the original agreement, this obligation may no longer be applicable as the penalty clause has expired. However, there remains the possibility of legal actions, with Sony seeking a $90 million termination fee from ZEEL for alleged breaches under the terms of the merger cooperation agreement.
In response, ZEEL categorically denied all assertions raised by Sony and stated that its Board of Directors is evaluating options to protect the interests of stakeholders, including legal action and contesting Sony’s claims in arbitration proceedings.
The proposed merger, valued at $10 billion, aimed to consolidate more than 70 linear TV channels, two video streaming services (ZEE5 and Sony LIV), and two film studios (Zee Studios and Sony Pictures Films India). The deal, first proposed in 2021, had received regulatory approvals and shareholder consent. However, the expiration of the agreed timeframe for completion on December 21, 2023, led to an extension by a month.
Apart from valuation concerns, the leadership discord also played a role in the termination. An investigative report by the Securities and Exchange Board of India (SEBI) accused Zee founder Subhash Chandra and CEO Punit Goenka of “siphoning off” funds. Goenka, who was to lead the merged entity, faced a ban from holding executive office at any listed company, which was later reversed on appeal in October.
Sony Group’s decision to walk away from the deal with ZEE raises questions about the Japanese conglomerate’s future strategy in the Indian market. With potential challenges ahead, including competition from other players like Disney and Reliance, Sony’s next steps remain uncertain.
