Sony Group on Wednesday stated that talks between its Indian media and entertainment unit with Zee Entertainment Enterprises Ltd (ZEE) with regards to the proposed $10 billion merger are ongoing and that they will continue till January 20, according to Nikkei.
The development comes a day after ZEE termed as “baseless” and “factually incorrect” a Bloomberg report that stated Sony was planning to pull the plug on the long in the pipeline (since 2021) merger plans. ZEE had also asserted that it was committed to completion of the merger and was “working towards a successful completion of the same”.
According to Bloomberg, Sony was close to calling off the $10 billion merger due to a standoff over whether ZEE’s CEO Punit Goenka would lead the merged entity.
“Sony plans to file the termination notice before a Jan 20, 2024, extended deadline for closing the deal, saying some of the conditions necessary for the merger had not been met. However, discussions are still ongoing between the two sides and a resolution can still emerge before the deadline,” the report said.
Commenting on the report, Elara Capital’s analyst Karan Taurani has asserted that the merger conversations are on and will most likely go ahead without Goenka as CEO.
“We expect a final clarity on the extension of the deal by the third week of January 2024,” Best Media Info quotes Taurani as stating.
Taurani added, “We continue to believe that the deal is equally important for both entities with competitive intensity growing due to Disney/RIL talks gaining traction.”
There is a very small chance of Goenka putting the deal at risk due to his desire to become CEO, even if the term sheet and deal condition are mentioned, Taurani said.
Taurani explained that Zee has moved up 50% over the last year, despite a muted financial performance, largely on the back of valuation multiple re-rating due to the merger with Sony Corp. Any potential risk of the merger getting called off by Sony will have a significant negative impact on valuations of ZEE.
Talking about how the deal will go ahead in case Goenka concedes defeat, Taurani said that approvals from shareholders, the Board, ROC (Registrar of Companies) and MIB (Ministry of Information and Broadcasting) would be needed after the change in deal terms for a new CEO, which may only take a few weeks.
Taurani asserted that a fresh NCLT/CCI approval will not be needed for a change in CEO of the merged company.
“The NCLT/CCI approval isn’t time-bound, which means any potential extension has no negative impact on the merger,”
Meanwhile, Jinesh Joshi of Prabhudas Lilladher told CNBC-TV18 on Wednesday that Zee’s shares could fall between 30% to 40% in the event the deal does not go through.
