Zee Entertainment Enterprises Limited (ZEEL) said on January 22 that it has refuted all claims and will take "necessary steps" including taking legal action against Sony Pictures Networks India (SPNI), after the Japanese media company terminated the $10-billion merger of their India operations with it.
In a regulatory filing, Zee said, "The Company is evaluating all available options and basis the guidance received from the Board and will take all necessary steps to safeguard the long-term interests of its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings."
SPNI is the consumer-facing identity of Culver Max Entertainment Private Limited, which is an indirect wholly owned subsidiary of Sony Group Corporation, Japan.
Moreover, Zee also stated that despite numerous deliberations, "both parties failed to arrive at a consensus on pending conditions that required action on the part of both Zee and Culver Max. Punit Goenka, MD & CEO of Zee, was agreeable to step down in the interest of the merger and proposals in this regard were discussed." To be sure, Zee had proposed CEO Punit Goenka to take charge of the merger, but Sony disagreed in light of a market regulator probe into Goenka.
ALSO READ: Zee's major investors seek regulatory intervention as Sony merger stalls
Moreover, its its statement, Zee maintained that it has displayed "utmost commitment towards the merger by undertaking several permanent and irreversible steps, resulting in one time and recurring costs for Zee. "Despite this, the Company will continue to evaluate organic and inorganic opportunities for growth, leveraging the intrinsic value of its assets," it added.
Meanwhile, Punit Goenka, while celebrating the highly-anticipated Pran Pratishtha ceremony of the Ram Mandir in Ayodhya, tweeted his anguish about the termination of the deal, expressing that it is a "sign from the Lord."
"I believe this to be a sign from the Lord. I resolve to move ahead positively and work towards strengthening Bharat’s pioneering M&E Company, for all its stakeholders," he posted on his social media account.
As I arrived at Ayodhya early this morning for the auspicious occasion of Pran Pratishtha, I received a message that the deal that I have spent 2 years envisioning and working towards had fallen through, despite my best and most honest efforts.
I believe this to be a sign from… pic.twitter.com/gASsM4NdKq— Punit Goenka (@punitgoenka) January 22, 2024
Zee-Sony merger: Sony terminates $10-bn deal as deadline not met
Earlier today, Sony ended the merger, which was announced two years ago, as they could not agree on some deal conditions, and has also sought $90 million in termination fees from Zee. Unaware of the proceedings, Zee had last week said it was committed to the merger and was working to close the deal through "good faith negotiations". It was seeking to discuss an extension to a January 20 deadline to close the deal.
As per the deal, the merger was to be completed before December 21, 2023, including regulatory and other approvals with grace period of one month to complete the transaction.
If the merger did not close by 24 months after their signature date, the parties would be required to discuss an extension of the end date required to make the merger effective by a reasonable period of time, it said.
However, the companies could not close the deal by the end date as, among other things, the closing conditions to the merger were not satisfied by then, Sony said in its statement.
Zee Chairman's comment
Commenting on the termination of the merger, R. Gopalan, Chairman, Zee, said, “The Board of Directors has taken note of Sony’s letters purporting to terminate the Merger Co-operation Agreement, on the Company’s proposed merger with and into Culver Max Entertainment Pvt. Ltd, invoking arbitration and seeking interim reliefs. We are evaluating the next steps and considering the appropriate course of action."
"...the Board would like to assure its stakeholders that the Company will take all the necessary actions, in the best interest of all stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings. The Board has complete faith in the highly experienced senior management of the Company and will continue to guide the team. We recognize and value the trust our shareholders and stakeholders place in us, and we express gratitude for their continued support," Gopalan added.
Zee-Sony Merger: Deadlock on deal deadline
On December 17 last year, Zee sought an extension of the deadline from Culver Max and Bangla Entertainment Pvt Ltd (BEPL) under the 2021 agreement.
On December 19, SPNI had stated that it had not yet agreed to the deadline extension request by Zee. However, a day after it agreed to discuss the matter.
The proposed $10-billion merger had already received regulatory approvals from fair trade regulator CCI, NSE and BSE, shareholders and creditors of the company.
In August last year, the Mumbai bench of the National Company Law Tribunal (NCLT) also gave a go-ahead to the merger.
On January 20, shares of Zee closed 1.5 percent lower on BSE. The market is closed today (January 22) on occasion of Ayodhya Ram Mandir consecration.
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