ZEE Entertainment share price: Zee Entertainment Enterprises Limited (ZEEL) shares tanked about 14 percent on Wednesday after the media firm clarified that talks of reviving the cancelled merger deal with Sony are incorrect and the company is not engaged in any discussions.
ZEE shares crash after clarification on merger talks with Sony
ZEE shares were trading at Rs 166.75 apiece on the BSE, down 13.47 percent at 1415 hours on Wednesday.
On Tuesday, business daily ‘The Economic Times’ had reported, citing sources, that ZEEL had re-engaged with Sony Corp in a last-ditch attempt to revive the $10 billion merger.
“We would like to clarify that the company has not been involved in any negotiations,” ZEEL said in an exchange filing, reacting to the ET report suggesting a likely revival of talks with Sony.
After the buzz in the media and industry about the possible revival of talks, ZEEL shares rose over 10 per cent intraday on Tuesday.
“We wish to clarify that the Company is not aware of any information that has not been announced to the exchanges which could explain the movement in the trading,” ZEE said.
On Tuesday, ET reported that representatives from both sides are working to save the deal, and there has been a recent acceleration in efforts over the past two weeks to revive the merger.
However, there is a possibility that discussions may be unsuccessful as significant disagreements remain unresolved, and both parties stand firm on their positions, the report stated.
Sony terminated the merger with Zee due to unresolved “closing conditions” and leadership disputes, which also included disagreement over CEO Punit Goenka’s participation in regulatory matters.
Zee-Sony Merger Envisioned as a Media and Entertainment Powerhouse in India
The Zee-Sony merger, in the works for two years, would have created a media and entertainment giant in India with over 90 channels in sports and entertainment.
Sony Group Corporation (SGC) had stated that ZEEL failed to fulfil the merger conditions, and initiated proceedings at the Singapore International Arbitration Centre (SIAC) claiming $90 million in termination fee.
ZEEL had filed a petition before the National Company Law Tribunal (NCLT), demanding directions to Sony Group to implement the merger plan.
On February 4, SIAC dismissed Sony Group’s interim plea to prevent ZEEL from approaching NCLT to enforce the merger, related to a petition already filed by ZEEL in the Mumbai bench of NCLT regarding the matter.
The Mumbai bench of the National Company Law Tribunal (NCLT) has already issued a notice to Sony in this matter.
On Monday, Sony Group Corp terminated its merger with Zee Entertainment Enterprises Limited (ZEEL), bringing an end to the approximately two-year-long negotiations for a $10 billion deal.
Kalvar Max Entertainment Private Limited (CME), formerly known as Sony Pictures Networks India Private Limited, officially concluded the proposed merger with Zee on January 22, terminating the two-year effort towards a merger.
In a statement from Sony Pictures Entertainment, CME issued a notice on December 22, 2021, to terminate the agreement with Zee Entertainment Enterprises Limited (ZEEL) for the merger of ZEEL and CME.
“Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that the closing conditions of the merger were not satisfied by the end date. We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences,” the notice said.
The discussions on the 10 billion dollar merger, initiated in 2021, were expected to conclude by December 21, 2023. This deal faced various delays, including legal actions from regulators and creditors against the company.
The termination of the merger involves crucial factors, including the alleged money laundering case involving key promoters of Zee Entertainment. This has attracted the attention of the Securities and Exchange Board of India (SEBI). In this context, the significant role of Puneet Goenka, who successfully obtained relief from the Securities Appellate Tribunal (SAT), allowing him to retain his position as CEO, and the potential challenges for Sony in establishing its leadership in the new merged entity, has become apparent.
If the merger had proceeded, the combined entity would have controlled over 70 TV channels, two video streaming services (ZEE5 and Sony LIV), and two film studios (Zee Studios and Sony Pictures Films India). It would position itself as the largest entertainment network in India.
The conclusion of the Sony-Zee merger marks a significant development in the Indian media and entertainment sector, setting the stage for intense competition. Reports suggest that Reliance is also planning to merge its media and entertainment business with Disney, further intensifying its presence in the industry.
However, Zee Entertainment has refuted all claims made by Sony, stating that it has not violated any terms of the merger agreement. The company is actively evaluating available options to address the situation.
Regarding the dispute over Punit Goenka’s role, Zee clarified, “Punit Goenka, MD & CEO of ZEEL, was agreeable to step down in the interest of the merger and proposals in this regard were discussed, including for appointment of a director on the Board of the merged company, protections for the conduct of pending investigations and legal proceedings in the best interest of ZEEL’s directors and shareholders and the consequent modifications to the scheme to incorporate the same. ZEEL proposed an extension of a maximum period of six months for the consummation of the transaction, however, Culver Max did not provide any counter-proposal for an extension. These discussions did not result in any proposal from Sony but they rather have chosen to terminate.”
