Sony Cancels $10 Billion Merger with Zee in India
On Monday, Sony officially terminated the $10-billion merger deal with Zee Entertainment, its Indian counterpart, which had been agreed upon in late 2021. The proposed joint entity aimed to create a streaming giant with an estimated annual revenue of $2 billion, positioning both companies to better compete with industry giants such as Disney, Amazon, and Netflix in India's entertainment market, serving 1.4 billion people.
Reports surfaced suggesting that Sony expressed dissatisfaction with Zee's performance post-merger agreement. In response, Sony stated on Monday that the conditions necessary to finalize the deal were not met. A significant point of contention was Zee's insistence that its CEO, Punit Goenka, son of founder Subhash Chandra, lead the combined entity, despite ongoing probes by India's financial markets regulator into alleged fraud involving both men. Both Goenka and Chandra deny any wrongdoing.
In a statement, Zee mentioned that Goenka was willing to step down in the interest of the merger and proposed an extension of up to six months to complete the deal. Additionally, Zee refuted Sony's claim of seeking a $90 million termination fee for alleged breaches, categorically denying any such breaches.
Goenka, expressing disappointment on social media, mentioned that the deal he had been working on for two years had fallen through, attributing it to a divine sign. He posted a selfie from the inauguration ceremony of a Hindu temple in Ayodhya.
Before the proposed merger, Invesco, Zee's largest shareholder, had also pressured Goenka to resign. Under the agreed-upon terms, Sony was to own 50.86% of the new entity, with the Goenka family controlling 3.99%.
This development leaves Sony and Zee in a vulnerable position, especially considering reports of Reliance (RIL) negotiating a merger with Disney's India unit. The collapse of the deal has potential repercussions for Zee, requiring a reevaluation of strategies and potentially leaving them short of capital. Analysts note that the competitive landscape has changed significantly, with Sony's streaming service, Sony LIV, considered more successful and substantial compared to Zee's Zee5.
The Bombay stock market was closed for a public holiday, but Zee's shares have seen a decline of 13.6% in the past month and over 30% in the last two years. Sony's announcement came after the Tokyo market closed, with Sony's stock up 1.89% at 14,800 yen.