Reports: Sony Contemplating Abandoning $10 Billion Merger Deal with Zee
Sony’s Consideration for Merger Cancellation Stemming from CEO Punit Goenka Standoff at Zee
According to sources familiar with the matter, Sony Group is contemplating the termination of its merger agreement involving its Indian division and Zee Entertainment Enterprises, culminating a two-year period marked by various challenges and postponements in the creation of a projected $10 billion (approximately Rs. 83,040 crore) media conglomerate.
Allegedly, the Japanese conglomerate is considering scrapping the deal due to a standoff revolving around the leadership of Zee’s Chief Executive Officer, Punit Goenka—a position previously stipulated for him within the merged entity. However, Sony’s stance has shifted, no longer supporting Goenka as CEO due to ongoing regulatory investigations, as per the anonymous sources.
Reportedly, Sony intends to issue a termination notice ahead of the January 20 extended deadline, citing unmet conditions essential for finalizing the merger, as disclosed by one of the sources. Another source highlighted Goenka’s insistence on fulfilling the originally agreed-upon role of heading the merged company, asserting his position during extensive discussions over recent weeks.
Discussions are still ongoing between the two sides and a resolution can still emerge before the deadline.
Representatives for Sony and Zee did not immediately respond to an email and phone calls seeking comment.
Last-Mile Tussle
The scuttling of the deal due to the last-lap leadership tussle will not only leave Zee vulnerable to possible defaults, it’s coming at a time when billionaire Mukesh Ambani is seeking to bolster Reliance Industries Ltd.’s media ambitions by negotiating a merger with Walt Disney Co.’s India unit.
The collaboration between Sony and Zee had set its sights on establishing a substantial $10 billion media powerhouse, intending to challenge global giants like Netflix Inc. and Amazon.com Inc., as well as local industry titans such as Reliance, leveraging robust financial capabilities.
Initially, Zee, headquartered in Mumbai, had sought an extension beyond the December 21 deadline, requesting an additional month to conclude pending crucial closure prerequisites. Sony had expressed interest in reviewing Zee’s proposals aimed at fulfilling the outstanding conditions necessary for the merger’s completion.
Amidst these discussions, the Securities and Exchange Board of India (SEBI) accused Zee in June of fabricating loan recoveries to mask private financing dealings led by its founder, Subhash Chandra. SEBI’s interim order accused Chandra and his son, Goenka, of exploiting their positions and diverting funds, temporarily barring Goenka from assuming executive or directorial roles in listed companies.
While Goenka managed to obtain temporary relief from an appellate authority against SEBI’s order, Sony reportedly views the ongoing investigation as a matter of corporate governance, per previous reports by Bloomberg.
As per the 2021 agreement, Sony Pictures Networks India was slated to possess a 50.86 percent stake in the merged media entity, with Goenka’s family holding a 3.99 percent interest in the proposed transaction. Nearly all regulatory approvals were secured for the proposed merger, aimed at amplifying Sony’s presence in the media landscape within the world’s most populous nation.
