Sony said "the closing conditions to the merger were not satisfied"
A dramatic merger saga between Sony Group and Zee Entertainment has been scrapped after the former ended the deal.
Talks had been going on for two years and would have created a $10 billion media entity in India.
It would have had a vast array of content to take on homegrown rivals as well as global streaming giants such as Netflix and Amazon.
Sony’s decision to end talks comes at a time when Disney and Mukesh Ambani’s Reliance Industries are discussing combining their Indian media businesses.
In its statement, Sony said “the closing conditions to the merger were not satisfied” and that it “does not anticipate any material impact on its consolidated financial results as a result of the termination of the definitive agreements for the merger”.
It added: “After more than two years of negotiations, we are extremely disappointed… We remain committed to growing our presence in this vibrant and fast-growing market.”
Although the unmet conditions were not specified, there were reportedly tensions between the two companies over who would lead the combined entity.
Zee had proposed CEO Punit Goenka to become the leader of the merged company.
However, Sony disagreed as he was being investigated by India’s market regulator.
In 2023, the Securities and Exchange Board of India barred Goenka from holding directorships at any listed company, accusing him of being involved in diverting Zee’s funds to the group’s other listed entities.
Goenka denied the allegations.
An Indian tribunal lifted the ban on him in October but said he would have to cooperate with any investigation by the regulator.
Zee has received the termination letter and “is evaluating all the available options”.
Sony is also seeking $90 million in termination fees for alleged breaches of their merger agreement and emergency interim relief by “invoking arbitration”.
Zee said it denies all claims made by Sony and would take appropriate legal action.
Amid intensifying competition in India’s entertainment sector, the breakup coincides with the nation’s rise as a pivotal global market.
Prime Minister Narendra Modi anticipates India becoming the third-largest media and entertainment market.
If the Disney and Reliance deal materialises, it will fortify Disney’s presence and establish a colossal entity boasting 100+ TV channels and two streaming platforms.
If the Sony and Zee merger had been successful, it would have had a portfolio of over 90 channels.
Hetal Dalal, president and chief operating officer of Institutional Investor Advisory Services, said:
“The failure of the Zee-Sony merger will be disappointing for shareholders – this merger had the potential to materially change industry dynamics.”
Zee shares are down about eight per cent from their levels before the merger was first announced in September 2021.
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