Sony-Zee Merger Report is Unfounded and Factually Incorrect

By Consultants Review Team Tuesday, 09 January 2024

Zee-Sony merger: Zed Entertainment Limited emphasized on Tuesday that the reports and chatter that the multibillion-dollar merger between Zed Entertainment and Sony's India business will be halted before January 20 is false and factually incorrect. Bloomberg reported on Monday that Sony intends to cancel the $10 billion acquisition and will issue a termination notice before January 20. According to Bloomberg, Sony is no longer interested in the merger with Punit Goenka leading the new firm amid the continuing regulatory investigation.

"This is with reference to (i) the letter dated January 9, 2024 bearing reference number NSE/CM/Surveillance/13787 received from National Stock Exchange of India Limited; and (ii) an email dated January 9, 2024 bearing reference number L/SURV/ONL/RV/KS/ (2023- 2024)/ 78 received from BSE Limited, regarding the news item captioned "Sony on the brink of terminating $10 billion merger with Zed: The inside story of what went wrong over two years" In this regard, we would like to state unequivocally that the aforementioned story is unfounded and factually inaccurate. "We would like to reiterate that the Company is committed to the merger with Sony and is working hard to bring the proposed merger to a successful conclusion," the business said in a regulatory statement.

The statement went on to say: "We would also like to state that the Company has always complied with its obligations under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and will continue to make disclosures in accordance with the same."

Sony Pictures Networks India and ZEEL agreed to merge their linear networks, digital assets, production operations, and programme libraries in September 2021. The combined business would have over 70 TV stations, two video streaming services (ZEE5 and Sony LIV), and two film studios (Zed Studios and Sony Pictures Films India), establishing itself as India's largest entertainment network. According to Business Today, the $10 billion Sony-Zee merger is still in the works and has a '50:50' chance of being approved.

It should be noted that the Sony-Zee transaction contains a $100 million breakup fee, which is typically utilised in takeover agreements to create leverage on the seller and dissuade them from walking out of the transaction. The merger agreement permits Zed and Sony to extend the merger deadline three times. If Sony chooses to terminate the agreement, Zed will be charged a $100 million termination fee.

According to the insider, "dealing with multi-national bureaucracy is proving difficult on some matters."

"There are issues, and a solution must be found." Perceptions cannot trump the rule of law."

The Sony Group agreed to nominate the majority of the amalgamated entity's board of directors. N P Singh, the present Managing Director and CEO of SPNI, would be a member of this board. Concerns about the merger's viability arose after Sebi took action against Chandra and Goenka for diverting ZEEL cash. Shareholders have approved the merger of ZEEL and sectoral authorities, including the Competition Commission of India.

Following the publication of the news, shares of Zed Entertainment fell 10% to Rs 249.75 on the BSE. Around 1.40 p.m., the shares were trading at Rs 262.10 apiece on the BSE, down roughly 6%.

According to Emkay Global Financial's research study on Zed Entertainment, the breakdown at this level could be a setback for both Sony and Zed. "We believe that if the merger does not go through, it will be a lose-lose situation for both parties, especially in the face of competition from the much larger entity of Reliance-Disney (if the merger goes through)." Both parties may have to start over with their strategies, which would be a difficult order," the report stated.


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