Sony Group Corp is set to convene a board meeting today on January 19 to discuss the fate of the proposed $10-billion merger with Zee Entertainment Enterprises, as per an Economic Times report citing sources. The possible deal termination could be out on the Tokyo Stock Exchange early next week.
The merger, announced two years ago, aimed to establish the largest broadcast company in India. However, sources told the paper that complications have arisen, particularly in Punit Goenka’s place in the management and meeting of the outstanding condition precedents (CPs), straining the relationship between the two parties.
Key Meetings and Resolutions
Two consecutive meetings are scheduled, with Culver Max Entertainment, formerly Sony Pictures Networks India, conducting a board meeting on Thursday night (January 18), followed by Sony at its Tokyo headquarters.
Sony is expected to pass a resolution calling off the planned amalgamation unless Zee’s Managing Director and Chief Executive, Punit Goenka, agrees to step down from his current title in the merged company.
The resolution is also likely to call for the fulfilment of all outstanding CPs, which have become a point of contention between the two sides. Sources told the paper Zee representatives indicate that negotiations are ongoing, and emphasised efforts to resolve outstanding issues to make the deal viable.
Financial Implications
Sources from Sony highlight the need for auditing and financial adjustments even if Goenka agrees to step down, as per the report. This comes as Zee’s net profit has declined significantly since the merger announcement, raising concerns about the financial implications of the deal.
Sony’s holding in the combined entity is expected to be 53 percent, with a $1.6 billion investment commitment to expand its footprint. Issues surrounding leadership, including the role of Punit Goenka, and regulatory investigations remain unresolved. Zee retains a market share of 18 percent, surpassing Sony’s 6 percent in the Indian entertainment and broadcasting business.
Zee Entertainment stock rallied over 7 percent intraday on January 18 following media reports suggesting discussions on the merger’s completion.
Regulatory Challenges
The deal faced a setback when the Securities and Exchange Board (SEBI) banned Goenka and Subhash Chandra in August, alleging fund diversion. Although the Securities Appellate Tribunal (SAT) overturned the order in October 2023, regulatory challenges persist.
Sony, frustrated with delays and regulatory hurdles, is not keen on a hostile takeover but has expressed support for its India MD and CEO, NP Singh, as the interim chief executive.
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Published: 19 Jan 2024, 07:48 AM IST