Sony terminates merger agreement with Zee Entertainment

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More than two years after it was first announced, Sony Pictures Networks India (SPNI) (now known as Culver Max Entertainment Limited), a wholly-owned subsidiary of Sony Group Corporation (Sony) has decided to terminate its merger with Zee Entertainment Enterprises Ltd. (ZEEL). Meanwhile, ZEEL said that they are exploring legal action against Sony and Bangla Entertainment Pvt limited. 

The formal word by Sony on terminating the merger, first announced in 2021, comes after stalemate between the two companies over whether Zee’s Chief Executive Officer Punit Goenka would lead the merged entity which was valued at $10 billion. Sony is said to have their concern about Goenka as he is facing investigation by India’s capital markets regulator SEBI. Zee had last week said that they continuing to work towards for a successful merger. 

ZEE Entertainment, in its Board Meeting held on Monday, took on record communications received from Sony and Bangla Entertainment purporting to terminate the Merger Co-operation Agreement (MCA) and seeking a termination fee of $90 million on account of alleged breaches by ZEEL of the terms of MCA, invoking arbitration and seeking interim reliefs against ZEEL. 

“The definitive agreements provided that if the Merger did not close by a date twenty-four months after their signature date (the “End Date”), the parties would be required to discuss in good faith an extension of the End Date required to make the Merger effective by a reasonable period of time.  Such discussions were required to be held for a period ending thirty days after the End Date (the “Discussion Period”). The definitive agreements further provided that if the parties are unable to agree upon such an extension by the end of the Discussion Period, any party could terminate the definitive agreements by providing written notice,” said Sony Group Corporation in a statement. 

“The Merger did not close by the End Date as, among other things, the closing conditions to the Merger were not satisfied by then. SPNI has been engaged in discussions in good faith to extend the End Date but the Discussion Period has expired without an agreement upon an extension of the End Date. As a result, on January 22, 2024, SPNI issued a notice to ZEEL terminating the definitive agreements,” added Sony in its statement. 

ZEEL said that they categorically denies all the assertions raised by Culver Max (Sony) and BEPL on the alleged breaches under the terms of the MCA, including their claims for the termination fee. The Board of Directors noted that all efforts and steps were taken by ZEEL in line with the Merger Cooperation Agreement, approved by its shareholders and all regulatory authorities. 

ZEEL said that its Board of Directors is evaluating all the available options. Basis the guidance received from the Board, ZEEL will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings, the company said.  

The company claimed that Punit Goenka, MD & CEO of ZEEL, was agreeable to step down in the interest of the merger and proposals in this regard were discussed, including for appointment of a director on the Board of the merged company, protections for conduct of pending investigations and legal proceedings in the best interest of ZEEL’s directors and shareholders and the consequent modifications to the scheme to incorporate the same. “ZEEL proposed an extension of a maximum period of six months for consummation of the transaction, however, Culver Max did not provide any counter proposal for extension. These discussions did not result in any proposal from Sony but they rather have chosen to terminate,” it said. 

R. Gopalan, Chairman, ZEE Entertainment Enterprises Ltd, said, “The Board of Directors has taken note of Sony’s letters purporting to terminate the Merger Co-operation Agreement, on the Company’s proposed merger with and into Culver Max Entertainment Pvt. Lid, invoking arbitration and seeking interim reliefs. We are evaluating the next steps and considering the appropriate course of action. The Board has noted that the Company took all the required steps in the course of its integration journey over the last two years, to ensure that the scheme is implemented at the earliest.”

“That said, the Board would like to assure its stakeholders that the Company will take all the necessary actions, in the best interest of all stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings. The Board has complete faith in the highly experienced senior management of the Company and will continue to guide the team. We recognize and value the trust our shareholders and stakeholders place in us, and we express gratitude for their continued support,” he added.

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