According to Bloomberg News on Monday, Sony Group has called off the proposed $10 billion media merger between Zed Entertainment Enterprises (Zed) and its India unit, Culver Max Entertainment Ltd.The merger agreements between Culver Max Entertainment and Zed Entertainment, formerly known as Sony Pictures Networks India (SPNI), have been terminated. This move could have resulted in the creation of a media enterprise valued at Rs 83,140 crore ($10 billion) in the country.
“SPNI, a wholly owned subsidiary of Sony Group Corporation, today issued a notice terminating the definitive agreements entered into by SPNI and Zed Entertainment Enterprises Ltd (ZEEL) relating to the merger of ZEEL with and into SPNI, which was..announced on December 22, 2021,” said a statement issued by Sony Group Corporation.
After a 30-day grace period that ended over the weekend, during which the two parties were unable to come to an agreement on the deadline that was set in late December, Sony sent out its termination notice. Regarding the cancellation of the merger agreement, neither party has yet to release an official statement.
Earlier this month, Sony announced that it intended to back out of the merger because of the ongoing leadership dispute. The termination notice implies that the deal will not go through, even though Zed claimed that negotiations were still ongoing to save the deal.
The primary reason for the termination is a protracted dispute between the two organisations, mostly focused on the issue of leadership for the combined company.The crux of the disagreement was whether Zee’s CEO, Punit Goenka, would take the lead in the merged business, especially with the Securities and Exchange Board of India (SEBI) conducting a regulatory probe into his actions.
The agreement stated that the merger had to be finalised by December 21, 2023, subject to all necessary regulatory and other approvals, with a one-month grace period. The parties agreed to discuss extending the deadline for making the merger effective by a reasonable amount of time if it did not close within 24 months of the parties’ signature date. These talks had to take place for a duration that concluded thirty days following the termination date.
“The definitive agreements further provided that if the parties are unable to agree upon such an extension by the end of the discussion period, any party could terminate the definitive agreements by providing written notice,” said the document. However, the merger did not close by the deadline because, among other things, the merger’s closing conditions had not been met by then, according to the statement. After a one-month grace period, Sony sent ZEEL, the media and entertainment company supported by the Subhash Chandra family, a notice of termination.
Zee’s insistence that Punit Goenka lead the new entity in line with the terms of the 2021 agreement had been the main source of contention during the negotiations. Sony, though, voiced concerns because of the regulatory attention he is under.Though it is unclear how Zed will react to Sony’s letter of termination tomorrow, it is possible that the media behemoth will file a lawsuit to recover losses from the botched merger agreement.
ZEEL requested an extension of the deadline under the terms of the 2021 agreement from Culver Max and Bangla Entertainment Pvt Ltd (BEPL) on December 17 of last year. On December 19, SPNI declared that it had not yet granted ZEEL’s request for a deadline extension. But a day later, it consented to talk about the issue. The proposed merger worth Rs 83,140 crore ($10 billion) has already been approved by the company’s creditors, NSE, BSE, shareholders, and fair trade regulator CCI. The merger was also approved in August of last year by the National Company Law Tribunal’s (NCLT) Mumbai bench.