Sony Contemplates Cancelling $10 Billion Merger With Zee
Sony Contemplating Abandoning $10 Billion Merger with Zee Amidst Standoff Over Zee’s CEO Punit Goenka.
Sony Group is planning to call off the merger pact of its India unit with Zee Entertainment Enterprises, said people familiar with the matter, capping two years of drama and delay in creating a $10 billion (roughly Rs. 83,040 crore) media giant.
The Japanese conglomerate is looking to cancel the deal due to a standoff over whether Zee’s Chief Executive Officer Punit Goenka, also its founder’s son, would lead the merged entity, the people said, asking not to be named as the information is not public. While the agreement signed in 2021 was that Goenka would lead the new company, Sony no longer wants him as CEO amid a regulatory probe, the people said.
Sony plans to file the termination notice before a January 20 extended deadline for closing the deal, saying some of the conditions necessary for the merger had not been met, one of the people said. Goenka has stood his ground in wanting to helm the merged entity, as agreed initially, over prolonged meetings in the past few weeks, according to another person.
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.
“Sony-Zee $10 Billion Merger Faces Uncertainty Amidst Deadline Extension Request and Corporate Governance Concerns
The proposed merger between Sony and Zee aimed at creating a $10 billion media giant, poised to compete with global streaming powerhouses like Netflix and Amazon, is now in jeopardy. Mumbai-based Zee sought an extension of the December 21 deadline, prompting Sony to wait for Zee’s proposals on addressing the remaining critical closing conditions.
Complicating matters, the Securities and Exchange Board of India (SEBI) alleged in June that Zee engaged in loan recovery manipulation to conceal private financing deals by its founder, Subhash Chandra. SEBI’s interim order accused Chandra and his son, Goenka, of abusing their positions and diverting funds, leading to a prohibition on Goenka from executive or director roles in listed companies.
Although Goenka secured relief from an appellate authority against the SEBI order, Sony perceives the ongoing investigation as a corporate governance issue, as reported by Bloomberg earlier. The proposed merger terms outlined in the 2021 agreement indicated that Sony Pictures Networks India would hold a 50.86 percent stake in the merged entity, with Goenka’s family owning 3.99 percent. Despite receiving almost all regulatory approvals, the merger’s future is uncertain, raising questions about Sony’s expansion plans in the world’s most populous country.”
