Japan’s Sony Group (6758.T) claimed on Monday that it had sent Zee Entertainment (ZEE.NS) a cease-and-desist notice seeking to cancel the $10 billion merger of its Indian businesses following disagreements on leadership of the joint entity, Reuters reported.
The deal was perceived as crucial to the companies’ survival in a highly competitive market, given the impending merger of Disney’s (DIS.N), Indian business and the media assets of billionaire Mukesh Ambani’s Reliance Industries (RELI.NS).
Sony stated that the company was “engaged in discussions in good faith to extend the end date but the discussion period had expired without an agreement upon an extension of the end date.”
While Sony did not specify on Monday what terms of the agreement were not fulfilled, the impasse over who would lead the combined entity has put the merger in jeopardy. Zee had suggested CEO Punit Goenka, but Sony did not agree due to a market regulator’s investigation into Goenka.
Sony said it does not expect any material impact on the company’s 2024 fiscal year performance due to the deal’s termination, as it has factored the agreement into its outlook. Karan Taurani, an analyst at Elara Capital, commented:
A deal collapse will have a negative impact on both parties as they were looking at scaling up in the Indian market which is going through a digital disruption and a potential threat of increased competition intensity if the Reliance-Disney deal goes through.
Zee’s four-year deal with Disney’s Star for the rights to broadcast certain cricket events would also be at risk if the deal with Sony collapses, as Zee would have to pay between $1.32 billion and $1.44 billion over the agreement’s tenure, analysts calculated. The broadcaster missed a $200 million payment deadline set in early January.
Zee shares were closed with 1.5 per cent decline in Saturday’s trading session in Mumbai. There was no trading on Monday due to a public holiday in the state of Maharashtra.
