Due to the merger conditions set by the Competition Commission of India (CCI), Zee had to close certain ventures. If the merger with Culver Max Entertainment (Sony India) fails by January 20, Zee Entertainment Limited (ZEEL) might file a suit claiming damages.
The imposed structural remedies, including divesting three Hindi channels, Big Magic, Zee Action, and Zee Classic, would result in a significant loss for Zee if the merger falls through. The agreement, signed in 2021, had a stipulated two-year period for completion before December 21, 2023.
The original Zee-Sony agreement included a provision for $100 million in penalties if either party failed to fulfill the deal, but this agreement lapsed on December 21. Although the two sides agreed to extend talks by 30 days in an effort to finalize the deal before the January 20 deadline, a recent report suggests that, with the expiration of the clause, Sony may avoid paying the penalty if it chooses to terminate the agreement.
Culver Max Entertainment (formerly Sony Pictures Networks India) and ZEEL had initially entered a non-binding term sheet in 2021 to merge their linear networks, digital assets, production operations, and program libraries.
Recent reports indicate that Sony is considering issuing a termination notice before January 20, citing discomfort with Pawan Goenka leading the merged entity due to ongoing regulatory scrutiny. While the proposed merger has received approvals from regulatory bodies such as the Competition Commission of India (CCI), NSE, BSE, shareholders, and creditors, Sony's concerns reportedly stem from Goenka's issues with the Securities and Exchange Board of India, leading to proposals to replace him with Sony India head NP Singh.
Initially, Goenka agreed to proceed with the merger without taking the top position. However, his stance shifted after obtaining temporary relief from the Securities Appellate Tribunal (SAT) regarding the Sebi investigation. Following SAT's clearance of the deal, Goenka now wishes to adhere to the original terms of the agreement.
In June of the previous year, Sebi accused Goenka and Zee Group Chairman Subhash Chandra of diverting company funds. However, in October, SAT lifted the ban on Goenka, allowing him to resume board positions in Zee Group companies.
As of 9:30 am on Wednesday, shares of Zee Entertainment were trading at Rs 255.80, reflecting a 0.93 percent increase from the previous close.
