According to people familiar with the matter, the fate of the planned merger between Sony Group Corp.'s India unit and Zed Entertainment Enterprises Ltd. could be known as early as next week, as the companies face a looming deadline to resolve their standoff or scuttle a long-awaited deal to create a $10 billion media giant.  

Unless the two parties can agree on who would run the merged firm and finalise the merger, Sony is likely to write a letter to Zed next week stating that the merger's stipulated demands could not be met, according to the sources, who asked not to be identified since the information isn't public. According to the sources, this could spell the end of the transaction because there won't be enough time to wrap up all the loose ends before the formal Dec. 21 deadline.

According to the people, Zed is adamant that its Chief Executive Officer Punit Goenka — also its founder's son - lead the new firm, as envisaged in the 2021 agreement, while Sony is leery of his selection given a regulatory probe against Goenka. This has caused a last-minute squabble in the two-year-old merger proposal, which has already seen its fair share of drama and delays.

In an emailed statement, a Zed spokesperson stated that the company was "actively engaged" in the timely completion of all conditions for the acquisition, without commenting on the leadership issue. Zed had finished the majority of them and was in contact with Sony "on a regular basis", he claimed. Sony officials did not respond to a request for comment.

The markets regulator, the Securities and Exchange Board of India, claimed in June that the Mumbai-based media business fabricated debt recovery to mask private funding agreements by its founder, Subhash Chandra. In an interim decision, Sebi stated that Chandra and his son, Goenka, "abused their position" and siphoned off monies. 

While Goenka was granted relief from the Sebi order, which prevented him from serving as an officer or director in a publicly traded business, Sony remains concerned about the ongoing investigation, according to the sources. This deadlock was initially reported by the local daily Mint.

Who is the first to blink?  

Unless one of the partners blinks, the merger is on the verge of failing. The Sony-Zee merger aimed to establish India's largest entertainment firm, with the financial clout to compete with global behemoths such as Netflix Inc. and Amazon.com Inc., as well as local conglomerates such as Reliance Industries Ltd. 

According to the 2021 agreement, Sony will own 50.86% of the amalgamated business, while Goenka's family will own 3.99%, with public shareholders owning the remaining part. According to the sources, Sony is not considering extending the December 21 deadline. To be sure, the proposed merger has practically all regulatory permissions and can yet be completed if the two parties resolve their differences quickly. They might also request an extension of the merger date from India's corporation court. 

According to a report from brokerage company Motilal Oswal Financial Services Ltd., if completed, the purchase will help Sony expand its media operation in the world's most populous country, with over 75 television channels and a market share of 37%, ahead of Disney-owned Star's 24%.

Consolidation in the sector is already heating up, with Reliance, which previously tried to take out Zed, in advanced talks to buy out Walt Disney Co.'s India operations, Bloomberg News reported last month.