Zee Entertainment Enterprises on January 9 denied media reports of Sony calling off the mega $10 billion merger with the company. In a regulatory filing, Zee said, "Company is committed to the merger with Sony and is continuing to work towards a successful closure of the proposed merger."
The development comes after Bloomberg reported that the Sony Group is planning to cancel deal with Zee Entertainment due to a brewing conflict over whether its chief executive officer Punit Goenka should lead the merged entity.
Bloomberg in its report had quoted Karan Taurani, analyst at Elara Securities saying, “any potential risk of the merger getting called off by Sony will have a significant negative impact on valuations. We don’t foresee Sony agreeing on Punit Goenka taking the chief executive role due to the ongoing investigation against him.”
Calling the report "baseless and factually incorrect," Zee also stated the company has always complied with its obligations under the SEBI Regulations, 2015 and "will continue to make disclosures in accordance with the same."
Post the news report, shares of Zee Entertainment crashed 10 percent to Rs 249 per share on January 9 during opening hours. However, around 1:40 pm, the stock was off lows, trading nearly 6 percent down at Rs 262.10 apiece on BSE.
Zee-Sony merger: Deadline looms
The fate of the mega merger between two media conglomerates has been hanging by a thread for long as both the parties are unable to finalise an agreement even with the end of the one-month grace period looms. By January 21, the one-month grace period will end.
The two parties are yet to come to an agreement over Zee MD and CEO Punit Goenka leading the merged entity after Sony expressed concerns after SEBI barred him from holding managerial posts in Zee and any of the entities in a fund-diversion case.
Sony was planning to file termination suit before January 20, the extended deadline for closing the deal, saying that some of its conditions had not been met, Bloomberg reported. Negotiations were, however, still on and a resolution could emerge before January 20, the report added.
Zee-Sony merger: Timeline
The proposed $10-billion merger has already received regulatory approvals from Competition Commission of India (CCI), bourses NSE and BSE, shareholders and creditors of the company.
In August last year, the Mumbai bench of the National Company Law Tribunal (NCLT) also approved the merger of ZEEL and Sony. This followed an interim order by SEBI barring Essel Group chairman Subhash Chandra and Zee Entertainment Enterprises Ltd MD and CEO Punit Goenka from holding the position of a director or key managerial personnel in any listed company. The market regulator took action after they were found diverting funds from the company.
Chandra and Goenka moved the Securities Appellate Tribunal (SAT) challenging the Sebi interim order. In October, SAT quashed the Sebi interim order.
Earlier in September 2021, then Sony Pictures Networks India and ZEEL entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations and programme libraries.
The combined entity will own over 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.
Subsequently, the two parties signed a definitive agreement for their merger in December 2022.
The majority of the board of directors of the combined entity would be nominated by the Sony Group and include the current SPNI Managing Director and CEO NP Singh.
However, questions over the future of the merger arose after SEBI's actions against Chandra and Goenka for siphoning off funds of ZEEL.
(With agency inputs)
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