Sony Corporation on Monday said it is calling off a $10-billion merger of its India unit with Zee Entertainment Enterprises Ltd, following a stalemate over who will lead the merged entity.
The entertainment giant sent a termination notice to ZEE on the deal, which was announced more than two years back, and is seeking $90 million as break-up fees for violating the terms of the merger pact and “invoking arbitration”.
In a stock exchange filing on the issue, Zee on its part denied all claims made by Sony and said it is exploring legal remedies. “Zee has displayed utmost commitment towards the merger by undertaking several permanent and irreversible steps, resulting in one time and recurring costs for Zee,” it stated.
The Sony notice reads:
“Sony issued a notice terminating the definitive agreements entered into by SPNI and Zee Entertainment Enterprises Ltd. (“ZEEL”) relating to the merger of ZEEL with and into SPNI (the “Merger”), which was previously announced on December 22, 2021.
The definitive agreements provided that if the Merger did not close by the date twenty-four months after their signature date (the “End Date”), the parties would be required to discuss in good faith an extension of the End Date required to make the Merger effective by a reasonable period of time. Such discussions were required to be held for a period ending thirty days after the End Date (the “Discussion Period”).
The definitive agreements further provided that if the parties are unable to agree upon such an extension by the end of the Discussion Period, any party could terminate the definitive agreements by providing written notice. The Merger did not close by the End Date as, among other things, the closing conditions to the Merger were not satisfied by then.
SPNI has been engaged in discussions in good faith to extend the End Date but the Discussion Period has expired without an agreement upon an extension of the End Date. As a result, on January 22, 2024, SPNI issued a notice to ZEEL terminating the definitive agreements. Sony has not included the impact of the Merger in its consolidated financial results forecast for the fiscal year ending March 31, 2024, which was announced on November 9, 2023, and does not anticipate any material impact on its consolidated financial results as a result of the termination of the definitive agreements for the Merger.”
Additionally, Culver Max Entertainment (aka SPNI) has also issued a statement: “Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date. We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences.”
Late last week ZEE had written to Culver Max Entertainment for a further one month extension to the merger deadline that ended on January 20 (after a month month extension).
On Friday, BSE sought clarification from ZEE on a news report regarding the merger but the media company said it was not aware of any Sony board meeting being held with regards to the deal.
The proposed merger, initially announced two years ago, involves combining their TV channels, streaming platforms, and film assets. As per the 2021 agreement, the Goenka family will own 3.99 percent shares in the merged entity, whereas Sony will hold 50.86 percent majority shareholding. The remaining stake will be in possession of public shareholders.
As per the agreement, the merger was to be completed by December 21, 2023.
IF the merger had gone through, it would have created a $10 billion media and entertainment conglomerate.
The developments come at a time when there are ongoing merger discussions between Reliance India Ltd (RIL) and The Walt Disney Company. As per reports, a non-binding agreement to potentially merge Disney Star and Viacom 18 has already been signed, with both companies currently in the due diligence phase.
