Is Sony Pulling Out Of The $10B Mega Merger With Zee Entertainment?

In a move that’s set to ripple through the Indian entertainment industry, Sony Group has reportedly decided to abandon its $10 billion proposed merger with Zee Entertainment Enterprises. This brings an end to an unsettling saga of negotiations that lasted two years.

What Happened: According to a report by Bloomberg on Monday, the planned merger between Sony’s India division and Zee Entertainment is on the brink of collapse due to disputes over leadership roles. Sony is not in favour of Zee's CEO Punit Goenka, the founder’s son, leading the merged company, owing to a continuing regulatory investigation.

Media reports had earlier suggested as well that Sony’s demand is for its own executive to lead the merged company. The merger, poised to be the biggest in India's entertainment sector, had Sony acquiring a majority stake, reducing the Goenka family’s share to 3.99%.

Sony plans to serve a termination notice before the January 20 deadline, pointing towards unfulfilled conditions necessary for the merger. Despite this, Goenka is adamant about leading the merged organisation as initially agreed.

If the merger falls through, Zee might be exposed to potential defaults. This comes at a time when India’s Reliance Industries, under the leadership of billionaire Mukesh Ambani, is eyeing a merger with Walt Disney Co.‘s India unit.

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The merger between Sony and Zee aimed to establish a $10 billion media powerhouse to rival Netflix, Amazon, and local heavyweights like Reliance.

SEBI, the Securities and Exchange Board of India, has accused Zee of concocting loan recoveries to mask private financing deals by its founder, Subhash Chandra. Chandra and Goenka are alleged to have abused their roles and diverted funds, leading to a ban on Goenka from holding executive or director positions in listed companies.

Although the Indian tribunal had lifted the ban on Goenka, allowing him to resume his board positions and setting the stage for the merger. Sony views the ongoing investigation as a corporate governance problem.

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