Zee Entertainment stock jumps 15% as co settles merger termination disputes with Sony

Zee Entertainment | CMP Rs xx | Share price jumped as much as 15 percent today (August 27) after the media firm said it has entered into an agreement to settle all disputes with Sony regarding the termination of merger.

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Zee Entertainment Enterprises Ltd share price jumped as much as 15 percent today (August 27) after the media firm said it has entered into an agreement to settle all disputes with Sony regarding the termination of merger. In the afternoon trade, Zee stock jumped to an intraday high of Rs 154.9, before cooling off to Rs 147.7, still up about 10 percent from the previous close.

"As part of the settlement, the companies (Zee and Sony Pictures Networks India) have mutually agreed to withdraw all respective claims against each other, in the ongoing arbitration at the Singapore International Arbitration Centre, and all related legal proceedings initiated in the National Company Law Tribunal (NCLT) and other forums," Zee Entertainment said in a statement.

Earlier, in January this year, Sony Pictures Networks India (SPNI) terminated a proposed $10 billion merger deal with Zee Entertainment, calling off a December 2021 agreement. Sony also sought a $90 million termination fee on account of alleged breaches by Zee Entertainment of the terms of the merger agreement.

Zee too had sought termination fee of $90 million (Rs 750 crore) from SPNI and its entity Bangla Entertainment Pvt. Ltd. (BEPL) on May 23 for pulling the plug on $10-billion merger.

"Culver Max and BEPL have failed to comply with their obligations under the Merger Cooperation Agreement (MCA). Therefore, the Company has terminated the MCA and called upon Culver Max and BEPL to pay the termination fee", Zee had said in an exchange filing.

In their statement released on August 27, the two companies said that under the terms of the settlement, none of the parties will have any outstanding or continuing obligations or liabilities to the other.

"The settlement stems from a mutual understanding between the companies to independently pursue future growth opportunities with a renewed purpose and focus on the evolving media & entertainment landscape, signifying the definitive conclusion of all disputes," according to the statement by the two firms.

The mega-merger between Zee and Sony was called off on January 22 this year and one of the main reasons cited behind the $10 billion deal being derailed was the lack of consensus over who would head the merged entity. While ZEEL MD and CEO Punit Goenka earlier agreed upon as the candidate to be at the helm of the merged company, Sony reportedly sought a reconsideration after Goenka came under a SEBI probe.

The merger deal had received an in-principle approval from ZEEL's board of directors in September 2021. One of the first legal roadblocks to the merger emerged, as the IndusInd Bank moved the Mumbai bench of the National Company Law Appellate Tribunal (NCLAT) to initiate insolvency proceedings against Zee. The lender, in its petition, claimed that the Mumbai-based media company defaulted dues amounting to Rs 83.08 crore.

After the merger was called off, Sony Group Corporation had initiated arbitration proceedings before Singapore International Arbitration Centre (SIAC) claiming $90 million as a termination fee saying that ZEEL failed to satisfy merger conditions and also initiated arbitration proceedings before Singapore International Arbitration Centre (SIAC).

ZEEL had also initiated legal actions to contest the claims of $90 million filed by Sony Group before SIAC.

The two media firms in their recent statement have said that they have arrived at a comprehensive non-cash settlement, amicably resolving all disputes related to the merger co-operation agreement.