Zee’s shares dropped as much as 30 per cent to hit fresh 52-week ow of Rs 162.25. | Image:Republic
Sony-Zee merger abandoned: Days after Japan-based Sony Group officially called off its $10 billion merger with Zee Entertainment in India, a termination notice seen by Reuters suggests that Zee has failed to meet specific financial terms outlined in the deal and provide a viable plan to address the issues.
Zee Entertainment, in response, has denied the allegations in a letter addressed to Sony, also reviewed by Reuters, accusing the Japanese company of acting in “bad faith” by terminating the merger.
The proposed merger between Zee and Sony aimed to create a media powerhouse in India, boasting over 90 channels covering sports, entertainment, and news. However, on January 22, Sony issued a statement announcing the termination, citing unmet “closing conditions” after two years of negotiations. While the contents of the termination notice were not made public by either party, Reuters’ review of Sony’s notice highlighted Zee’s failure to meet financial thresholds, including cash availability, and criticized the Indian network for a “lack of commercial prudence.”
In the 62-page notice, Sony asserted that certain breaches of the merger agreement were irreparable, and further attempts at discussion would be futile, given Zee’s denial and failure to propose protective measures for Sony’s interests.
Zee responded privately to Sony on January 23, refuting all allegations and deeming Sony’s demand for a $90 million termination fee as “legally untenable.” Zee accused Sony of acting in “bad faith” and requested the withdrawal of the termination notice.
Following the collapse of the deal, Zee’s shares experienced a 30 per cent decline. The company has faced business challenges in recent years, with advertising revenues dropping to $488 million for the 2022-23 financial year, down from approximately $600 million five years earlier. Cash reserves also decreased from $116 million to $86 million during the same period.
Sony, in its termination notice, highlighted Zee’s cash position of Rs 476 crore as of September 30, emphasising that it fell significantly below the merger agreement requirements.
Reuters had previously reported concerns from Sony regarding Zee CEO Punit Goenka, who was set to lead the merged entity, facing a regulatory investigation for suspected diversion of company funds—an allegation Goenka has vehemently denied. Sony’s termination notice referenced the “ongoing investigation” as a factor in the decision.
The notice also stated that Zee was “unable to realistically assess the timeline required to resolve all the outstanding issues,” contributing to Sony’s decision to abandon the merger.
(With Reuters inputs.)
