Sony Terminates $10 Billion Deal to Merge Its India Assets with Zee; Legal Action to Follow

GG News Bureau
Bengaluru, 22nd Jan. Sony Group Corp. has officially informed Zee Entertainment Enterprises Ltd. that it intends to cancel the merger between its India unit and the media network. This decision marks the end of a two-year acquisition process and leaves Zee vulnerable to competition as its rivals strengthen their positions.

According to sources familiar with the matter, Sony sent a termination letter to Zee on Monday and is expected to disclose this information to the exchange later. The letter states that the termination is due to the conditions of the merger agreement not being met.
Sony declined to comment on the matter, while Zee has not yet responded to a request for comment.

The termination of the merger follows a deadlock between the two companies regarding the leadership of the merged entity.

Zee’s CEO, Punit Goenka, has been under investigation by India’s capital markets regulator, which has created uncertainty about his role in the merged company. This disagreement appears to have derailed the deal, which would have created a $10 billion media giant capable of competing with global players like Netflix and Amazon.

On January 8, Bloomberg News reported that Sony planned to cancel the merger due to the failure to resolve the leadership dispute. However, Zee later stated that they were still in discussions to complete the merger. If Goenka is removed from Zee, Sony may reconsider another merger proposal.

Zee’s financial health has been deteriorating, with a 95% drop in profit for the year ended March 31. This decline in profitability could make Zee a more attractive target for Sony.

The termination letter from Sony comes after a 30-day grace period, during which the two sides were unable to reach an agreement on a deadline set in late December. The leadership dispute was the main obstacle to the deal. Zee insisted that Goenka would lead the new entity as agreed in the 2021 pact, while Sony had concerns about his appointment due to the regulatory probe against him.

In June, the Securities and Exchange Board of India accused Zee of falsifying loan recoveries to cover private financing deals by its founder, Subhash Chandra. The regulatory authority stated that Chandra and his son, Goenka, misused their positions and diverted funds.