Sony calls off merger with Zee, demands $90 million termination fee
New Delhi, Jan 22: Sony Group Corp on Monday said it is calling off a USD 10 billion merger of its India unit with Zee Entertainment, following a stalemate over who will lead the merged entity.
The entertainment giant sent a termination notice to Zee on the deal, which was announced more than two years back, and is seeking USD 90 million as break-up fees for violating the terms of the merger pact and "invoking arbitration".
In a stock exchange filing on the issue, Zee on its part denied all claims made by Sony and said it is exploring legal remedies. "Zee has displayed utmost commitment towards the merger by undertaking several permanent and irreversible steps, resulting in one time and recurring costs for Zee," it said.
A standoff over leadership is said to be the reason for the deal being called off. Sony had resisted demand by Zee chief executive Punit Goenka, who was investigated by market regulator SEBI over fraud allegations, to stay on after the merger.
The deal was seen as crucial for both companies for survival in the world's fastest-growing large economy.
The deal would have created an entertainment conglomerate with more than 70 Indian TV channels, popular Bollywood studios and an extensive film library to take on global powerhouses Netflix and Amazon.
"Sony Pictures Networks India Pvt Ltd (now known as Culver Max Entertainment Limited), a wholly-owned subsidiary of Sony Group Corporation, today issued a notice terminating the definitive agreements entered into by SPNI and Zee Entertainment Enterprises Ltd. relating to the merger of ZEEL with and into SPNI, which was previously announced on December 22, 2021," the Japanese firm said in a statement.
The definitive agreements provided for the merger to close within 24 months. On expiry of such a period, the deadline was extended by a month.
"The merger did not close by the end date as, among other things, the closing conditions to the merger were not satisfied by then, " the filing said.
Sony said it was "extremely disappointed that the conditions to the merger were not satisfied" by the deadline, which had been set as January 21. The company added that it "remained committed to growing our presence" in India.
In a stock exchange filing, Zee said it had also received a demand from Sony for a USD 90 million termination fee over "alleged breaches" of the terms of the deal.
"The company categorically denies all claims and assertions" by Sony and is evaluating all options, Zee said in the filing adding it "will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action".
Zee said it had taken "all efforts and steps" in line with the merger agreement and had consistently worked towards implementation of the deal.
The Indian firm had seen a decline in financial performance with profits declining due to rising streaming costs and falling advertising revenue. Zee's four-year agreement with Disney's Star for TV broadcasting rights for certain cricket events may be at risk after the deal collapses as it has to pay USD 1.32-1.44 billion over the tenure of the pact.
Sony-Zee deal, which won approval from regulators in August, would have created a USD 10 billion entertainment behemoth in which Sony was supposed to own a 50.86 per cent stake, with Goenka's family owning 3.99 per cent.
The collapse of the deal will now send Zee to redraw its strategy to compete against such a giant as the possible merger of media operations of Reliance Industries Ltd and Walt Disney Co.
Sony too will have to relook at its India strategy as it no longer will benefit from Zee's deep library of content in regional languages and its bouquet of dozens of television channels.
The merger, which would have created a USD 10-billion entity had already received regulatory approvals from NCLT, fair trade regulator CCI, bourses NSE and BSE, shareholders and creditors of the company.
However, an interim order by Sebi barring Essel Group chairman Subhash Chandra and Goenka from holding the position of a director in any listed company after market regulator found them diverting funds from the company, changed the game.
Though the Sebi order was stayed by the Securities Appellate Tribunal, Sony is not comfortable with Goenka leading the merged entity during the probe due to the stringent corporate governance policy in Japan.
The combined entity would have owned over 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.
Sony had plans to invest USD 1.575 billion in the merged entity and have majority stake. Chandra family was also free to increase its shareholding from the current about 4 per cent to up to 20 per cent.
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CM Siddaramaiah alleges ‘criminal conspiracy’ in Sringeri recount, vows legal action
Bengaluru (PTI): Alleging a “criminal conspiracy” by BJP candidate D N Jeevaraj in the Sringeri Assembly poll recounting, Karnataka CM Siddaramaiah on Tuesday said the outcome was manipulated after valid postal ballot votes in favour of Congress leader T D Raje Gowda were tampered with during the recounting process.
Following a Karnataka High Court order on an election petition filed by Jeevaraj, challenging Raje Gowda’s election, the reverification and recounting were conducted on Saturday.
After the reverification and recount of postal ballots for the Sringeri Assembly constituency, votes polled in favour of Raje Gowda were reduced by 255, the returning officer said.
A report on the matter has been submitted to the Election Commission of India for further action, the officer added.
Congress leader Raje Gowda had won the 2023 Assembly polls from Sringeri by 201 votes, defeating his nearest rival Jeevaraj.
Addressing a press conference in Bengaluru, Siddaramaiah said the High Court had directed the recounting of postal ballots and that irregularities were noticed during the exercise conducted on May 2.
“This is a clear case of criminal conspiracy,” Siddaramaiah said, alleging that valid votes cast in favour of Raje Gowda were altered after being accepted by counting agents of all parties, including Congress, BJP, and JD(S).
He claimed that during the recounting of postal ballots, 255 votes were initially accepted as valid by all agents but were later tampered with by subordinate officials.
“There is a second mark on the votes polled in favour of Raje Gowda. They had accepted these as valid votes. Subsequently, another mark was made by officials. This is a clear case of criminal conspiracy,” he said.
When asked who was behind the alleged conspiracy, the CM replied, “It was hatched by Jeevaraj and others. It is planned.”
Siddaramaiah further alleged that the returning officer acted improperly by declaring the result despite the presence of an Election Commission observer during the recounting.
“Immediately after the counting, the returning officer announced the result. He should not have done so; this is against the law,” he said.
He pointed out that Raje Gowda had originally won by 201 votes, but after the recounting, the BJP candidate was declared the winner by 52 votes.
“The BJP has committed a criminal act of conspiracy. This is not vote chori but vote dacoity,” he alleged.
The CM said a police complaint had already been filed by Raje Gowda’s election agent, Sudhir Kumar, and emphasised the need for electoral integrity.
“We want transparency and free and fair elections. That is what our Constitution mandates,” he added.
Stating that the government would pursue legal remedies, Siddaramaiah said, “We are preparing an appeal challenging the returning officer’s announcement in a court of law.”
Responding to a separate query on elections in other states, the CM said there appeared to be an anti-incumbency factor in West Bengal, while results in Tamil Nadu were “surprising,” adding that Vijay’s party was emerging as the largest there.
Following the victory of party candidates in Bagalkote and Davanagere South, Siddaramaiah expressed confidence about future electoral prospects in Karnataka.
“Even in 2028, we will win the Assembly elections. We will come back,” the CM said.
Siddaramaiah added that he would order a forensic examination into the alleged tampering of postal ballots.
