Zee is adamant that its Chief Executive Officer Punit Goenka – also its founder’s son – lead the new firm, as promised in the 2021 agreement, but Sony is skeptical about his selection.
According to people familiar with the matter, the fate of the planned merger between Sony Group Corp.’s India unit and Zee Entertainment Enterprises Ltd. could be known as early as next week, as the companies face a looming deadline to resolve their standoff or scuttle a long-awaited deal to create a $10 billion media giant.
Unless the two sides can agree on who would run the merged firm and finalize the merger, Sony is expected to write a letter to Zee next week stating that the merger’s stated demands could not be satisfied, according to the sources, who requested not to be identified since the information isn’t public. That might spell the end of the agreement since there won’t be enough time.
According to the sources, Zee is adamant that its Chief Executive Officer Punit Goenka — also its founder’s son — lead the new firm, as promised in the 2021 agreement, but Sony is dubious of his selection given a regulatory inquiry into Goenka. This has caused a last-minute spat in the two-year-old merger proposal, which has already seen its fair share of drama and delays.
In an emailed statement, a Zee official stated that the firm was “actively engaged” in the timely completion of all conditions for the purchase, without commenting on the leadership problem. Zee had finished most of them and was in contact with Sony “regularly,” he added. Sony officials did not reply to a request for comment.
The markets regulator, the Securities and Exchange Board of India, said in June that the Mumbai-based media business fabricated debt recovery to mask private funding agreements by its founder, Subhash Chandra. In an interim decision, Sebi stated that Chandra and his son, Goenka, “abused their position” and siphoned off monies.
While Goenka was granted relief from the Sebi order, which prevented him from serving as an officer or director in a publicly traded business, Sony remains concerned about the ongoing investigation, according to the sources. This deadlock was initially reported by the local daily Mint.
Unless one of the partners blinks, the merger is on the verge of failing. The Sony-Zee merger aimed to establish India’s largest entertainment firm, with the financial clout to compete with global behemoths such as Netflix Inc. and Amazon.com Inc., as well as local titans such as Reliance Industries Ltd.
According to the 2021 agreement, Sony would own 50.86% of the amalgamated business, while Goenka’s family will own 3.99%, with public shareholders owning the remaining part. According to the sources, Sony is not considering extending the December 21 deadline.
To be sure, the planned merger has practically all regulatory permissions and can yet be completed if the two parties settle their differences quickly. They might also request an extension of the merger date from India’s corporation court.
According to a report from brokerage company Motilal Oswal Financial Services Ltd., if completed, the purchase will help Sony grow its media operation in the world’s most populous country, with over 75 television channels and a market share of 37%, ahead of Disney-owned Star’s 24%.
Consolidation in the sector is already heating up, with Reliance, which previously sought to buy out Zee, in advanced discussions to take out Walt Disney Co.’s India businesses, Bloomberg News reported last month.
