M&A: Sony terminates merger deal with Zee Entertainment

M&A: Sony terminates merger deal with Zee Entertainment

Transaction:

• Sony pictures entertainment gave a statement confirming sending termination notice to Zee Entertainment Enterprise Ltd., ending proposed $10 billion merger in India.
• Sony served the termination notice after the January 2024 deadline passed and closing conditions to merger were not satisfied by the end date. The termination notice was issued on January 22, 2024.
• Earlier in Dec 2021, Sony and Zee had signed definitive agreements to create largest media giant of India.

About Sony:

• Sony Group Corporation, earlier known as Tokyo Tsushin Kogyo K.K. (Tokyo Telecommunications Engineering Corporation), is a Japanese multinationalconglomerate corporation headquartered in Minato, Tokyo, Japan. 
• The Group comprises entities such as Sony Corp., Sony Semiconductor Solutions, Sony Entertainment(including Sony Pictures and Sony Music Group), Sony Interactive Entertainment, Sony Financial Group, and others.

About Zee Entertainment:

• Zee Entertainment Enterprises is an Indian media conglomerate with interests in television, print, internet, film, and businesses related to mobile content, and operates 45 channels worldwide.
• Zee gave India its first private satellite TV channel in 1992, and reached over 1.3 billion viewers around the world through linear and digital platforms.

Rationale:

• The Sony-Zee agreement aimed to establish India’s largest entertainment company, equipped with the financial strength to compete against global giants like Netflix Inc. and Amazon.com Inc. Additionally, it would position itself against local conglomerates such as Reliance Industries Ltd, currently in talks with Disney.
• In December 2021, Sony and Zee had signed definitive agreements to merge. Sony was to indirectly hold a majority of 50.86% of the combined company; the founders of ZEEL, Goenka family, would hold 3.99%; and the other ZEEL shareholders were to hold a 45.15% stake. The deal was anticipated to conclude in 8-10 months.
• Earlier, Zee had asked Sony to push back the deadline of December 21, 2023, for the merger which was inked on December 22, 2021. However Sony terminated the deal in January citing that Zee failed to meet closing conditions.
• Reuters reported that Sony and Zee disagreed over more than 20 compliance issues, including the Indian firm’s failure to dispose of some Russian assets and its $1.4 billion Disney cricket rights deal.
• ET had reported that Sony and Zee also couldn’t reach an agreement on appointing ZEEL MD Punit Goenka as the CEO of the merged entity, until he’s cleared of cases related to his family’s Essel Group.
• Sony said it did not anticipate any material impact on its consolidated financial results due to termination. However, collapse has certainly had an impact on struggling Zee, whose shares saw a significant erosion in market.