Sony Group Corp. has formally notified Zee Entertainment Enterprises Ltd. of its decision to terminate the merger with its India unit, marking the conclusion of a two-year acquisition saga. This development leaves Zee vulnerable to heightened competition as rival entities bolster their positions in the industry.
The termination was communicated via a letter sent by the Japanese entertainment giant to Zee, citing unmet conditions of the merger agreement as the primary reason. Sony is expected to disclose the termination officially to the exchange shortly, as insiders familiar with the matter revealed.
The termination comes after a prolonged stalemate between the two companies concerning the leadership of the merged entity. The pivotal question of whether Zee's CEO, Punit Goenka, would head the amalgamated organization became a significant point of contention. This leadership dispute, exacerbated by an ongoing investigation into Goenka's conduct by India's capital markets regulator, has ultimately led to the scuttling of the deal.
The collapsed merger, initially poised to create a formidable $10 billion media giant, faced hurdles over the last-lap leadership disputes. Zee insisted that Goenka lead the new entity as per the 2021 pact, while Sony expressed reservations due to the regulatory probe against him.
The termination letter from Sony arrived after the conclusion of a 30-day grace period over the weekend when the two sides failed to reach an agreement on a deadline set in late December. Regulatory approvals were in place for the deal, which would have seen Sony holding a 50.86% stake, with Goenka's family owning 3.99%.
The termination places Zee in a precarious position, grappling not only with financial vulnerability and investor concerns but also intensified competition from robust rivals such as Reliance Industries Ltd. and Walt Disney Co., who are progressing in their talks to merge their India media operations.
Sony, faced with the need to recalibrate its media plans for the populous country, was originally expected to benefit from Zee's extensive content library in regional Indian languages and its portfolio of local television channels. The fallout from the terminated merger underscores the challenges and uncertainties within the dynamic Indian media landscape.
This copy is written based on various agency inputs.