Mumbai, In a surprising turn of events, Sony Group Corp. is reportedly considering calling off the $10 billion merger pact with Zee Entertainment Enterprises Ltd., marking the culmination of two years fraught with drama and delays in the creation of a media giant.
The Japanese conglomerate is contemplating the termination of the deal due to an impasse over the leadership of the merged entity. The original agreement in 2021 stipulated that Zee’s CEO, Punit Goenka, the founder’s son, would lead the new company. However, sources reveal that Sony is now hesitant to have Goenka as CEO amid an ongoing regulatory probe.
Sony intends to file the termination notice before the extended January 20 deadline, citing unmet conditions necessary for the merger. Punit Goenka has reportedly maintained his stance on leading the merged entity as initially agreed, leading to prolonged discussions in recent weeks.
While discussions are ongoing, representatives for Sony and Zee have not responded to queries seeking comment.
Last-Mile Tussle and Implications
The potential derailment of the deal in the final stages, primarily due to a leadership tussle, leaves Zee vulnerable to possible defaults. This development comes at a critical juncture, as billionaire Mukesh Ambani seeks to fortify Reliance Industries Ltd.’s media aspirations through negotiations for a merger with Walt Disney Co.’s India unit.
The Sony-Zee merger aimed to create a $10 billion media powerhouse capable of competing with global giants like Netflix Inc. and Amazon.com Inc., as well as local heavyweights like Reliance.
Zee had previously requested an extension of the December 21 deadline, with Sony expressing interest in hearing Zee’s proposals on completing the remaining critical closing conditions.
In June, the Securities and Exchange Board of India (SEBI) alleged that Zee had fabricated loan recoveries to conceal private financing deals by its founder, Subhash Chandra. Although Goenka received a reprieve from an appellate authority against the SEBI order, Sony perceives the ongoing probe as a corporate governance concern.
As per the 2021 agreement, Sony Pictures Networks India Pvt. would have held a 50.86% stake in the merged media firm, with Goenka’s family owning 3.99%. The proposed merger had secured almost all regulatory approvals, offering Sony an opportunity to expand its media business in India.
—Bloomberg
