The merger between Sony Group Corp. and Zee Entertainment Enterprises Ltd. (ZEEL) has been officially called off by the Japanese firm. Sony Group has officially notified Zee Entertainment Enterprises about its plans, ending a two-year acquisition saga, news agency Bloomberg reported on Monday.
Sony Group sent a termination letter to Zee early on Monday and is expected to disclose it to the exchange later, citing people privy to the development, Bloomberg said. The Japanese company cited conditions of the merger agreement not being met by Zee as the reason for the termination. Sony and Zee spokespersons didn’t not immediately respond to Bloomberg request for comment.
According to the report, the move follows a stalemate between the two firms over whether Zee's Chief Executive Officer (CEO) Punit Goenka would lead the merged entity amid an investigation into his conduct by the capital markets regulator, SEBI. The standoff now appears to have scuttled the deal, which would have created a $10-billion media giant with the financial muscle to take on global powerhouses Netflix Inc. and Amazon.com Inc.
On January 8, Bloomberg stated that Sony was planning to call off the merger as the two sides fail to resolve the leadership dispute. However, Zee said later that they were still in talks to complete the merger. If Goenka is ousted from Zee, which has seen deteriorating financial health, Sony can potentially reconsider another merger proposal, according to one of the people. Zee’s profit for the year ended March 31 dropped 95 per cent to 478 million rupees ($5.8 million) compared with the previous period.
The Sony-Zee combine aimed to create a $10 billion media behemoth with the financial muscle to take on global powerhouses Netflix Inc. and Amazon.com Inc. as well as local heavyweights such as Reliance.
The termination letter from Sony came after a 30-day grace period ended over the weekend when the two groups couldn’t reach an agreement on a deadline set in late December.
In June, the Securities and Exchange Board of India (SEBI) alleged that the Mumbai-based Zee group faked the recovery of loans to cover private financing deals by its founder, Subhash Chandra. Chandra and his son, Goenka, “abused their position” and siphoned off funds, SEBI said in an interim order, barring Goenka from executive or director appointments in listed companies. While Punit Goenka got a reprieve from an appellate authority against the SEBI order, Sony viewed the ongoing probe as a corporate governance issue, Bloomberg reported earlier.