Timeline of Zee-Sony merger: extension or termination?

Merger woes: The Sony-Zee merger was inked in 2021, but was officially delayed on Zee’s request days before it was due for completion by December 21 last year.

As the extended deadline for the $10 billion merger comes closer, the ball is in Sony’s court to either extend or terminate the merger.

Republic Business spoke to experts on the dire repercussions of the merger falling off, with some of them maintaining such large-scale mergers take time.

The merger, which was cleared by the Competition Commission of India in 2022, is not yet completed since Sony and Zee have not reached a consensus on Zee Entertainment Enterprises Ltd (ZEEL) MD and CEO Punit Goenka heading the merged entity.

Cost to Companies

The original agreement included a provision for paying up a penalty of $100 million if either party backed out. This clause no longer exists after the December 21 deadline expiration.

Both parties agreed to extend talks by 30 days before the new deadline tomorrow, but Sony may not pay up penalties if the deal fell off, owing to the deadline expiring as per reports.

Who will be responsible?

Sony proposed replacing Goenka with Sony India head NP Singh. There were also reports on Sony being frustrated with delays and regulatory hurdles but is not keen on a hostile takeover.

Goenka had initially agreed to completing the merger with or without him heading the entity, but is now keen on sticking to the original terms of the agreement, as per reports.

This was bolstered after Goenka was cleared to resume board positions in Zee Group companies by the Securities Appellate Tribunal (SAT).

Portion of the Pie

For one, Sony holds over 50 per cent of the deal with Zee promoters holding 3.99 per cent of shares, the remaining portion being held by Zee shareholders.

Speculated Aftermath

The merger not being completed will require both Sony and Zee to report the progress to exchanges, with reports suggesting Sony will convene a meeting today to decide on the future, and report the consensus to the Tokyo Stock Exchange.

Zee is also planning legal action on Sony due to the closing down of profitable ventures to comply with the CCI merger conditions.

It was reported in October 2022 that Sony and Zee voluntarily agreed to sell three Hindi channels – Big Magic, Zee Action, and Zee Classic to allay fears of anti-competitive measures, and misusing their dominant position in the market. The merged entity would be operating more than 90 channels across the country.
    
The merger hit a roadblock on Sony being hesitant to appoint Goenka as the chief of the entity concerns, after market regulator Securities and Exchange Board of India (SEBI) barred him from holding managerial posts in Zee and any of the entities.

Amid reports that Sony will push for terminating the venture before the January 20 deadline, Japanese media reported that Sony still held talks with Zee for merging the two entities.

Zee also informed exchanges in January this year that the merger is still in the works, while discrediting media reports.

“We would like to clarify that the above-mentioned article is baseless and factually incorrect. We wish to reiterate that the Company is committed to the merger with Sony and is continuing to work towards a successful closure of the proposed merger,” Zee informed exchanges.

Analysts say the deal is crucial to the companies' survival amid the looming merger of local heavyweight Reliance Industries and Walt Disney's Indian media and entertainment businesses.