Zee moves NCLT after Sony terminates $10-bn deal

Sony terminated the $10 billion merger deal on January 22

Zee Entertainment Enterprises Ltd (ZEEL) on January 24 said it has moved the National Company Law Tribunal (NCLT) and Singapore International Arbitration Centre (SIAC) against Sony Pictures Network India's termination of the merger deal.

The company has approached the Mumbai-bench of NCLT, "seeking directions to implement the merger scheme", the Punit Goenka-led media major said in a regulatory filing.

The proposed amalgamation, which would have created a $10 billion media entity, was called off by Sony through a termination notice issued to ZEEL on January 22.

As per the merger agreement, inked on December 22, 2021, Zee and Sony Pictures Networks India (now known as Culver Max), along with Bangla Entertainment Pvt Ltd, were to be merged into a single entity within 24 months.

After the deadline lapsed last month, both the companies entered into a month-long negotiation, which reportedly failed to yield results due to a lack of consensus over who would be heading the merged entity. While Zee pushed for Goenka, its MD and CEO, to be appointed as the head of the merged company, Sony wanted its CEO N P Singh to preside at its helm, reports had suggested.

"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," Sony said in its statement issued on January 22.

Zee contests Sony's claims

Zee, in its exchange filing, said it specifically denied the charge of not meeting the merger conditions. The company has "complied with all its obligations in good faith", it said, adding that Culver Max and BEPL are not entitled to terminate the merger agreement.

Zee has also refuted Sony's demand of $90 million termination fee, stating that such a demand is "legally untenable and has no basis whatsoever".

Culver Max and BEPL are in "default of their obligations" to bring the merger into effect, Zee added, while pointing out that the merger had already received the nod from the NCLT last year.

"The company has called upon Culver Max and BEPL to immediately withdraw the termination and confirm that they will perform their obligations to give effect to and implement the merger scheme," Zee further noted.

Zee also said that it has "initiated appropriate legal action to contest Culver Max and BEPL’s claims in the arbitration proceedings before Singapore International Arbitration Centre (SIAC)".

Following the deal's termination by Sony, Zee's stock nosedived at the markets. On January 23, it suffered the highest single-day fall of 30.50 percent, and ended at Rs 152.50. In the trading session on January 24, the shares partially recovered, to settle at Rs 166.35 on the BSE.