Sony officially terminated the plans on January 22, stating that the "closing conditions" were not satisfied after two years of negotiations.
Sony has decided to withdraw its proposal for a $10 billion merger with Zee Entertainment, its Indian subsidiary, due to Zee's inability to meet certain financial conditions. According to the termination notice examined by Reuters, Sony stated that Zee failed to meet its financial responsibilities and did not have a feasible strategy to rectify the situation.
Zee, in response, denied the allegations in a letter to Sony, also reviewed by Reuters, accusing the Japanese company of acting in "bad faith" by calling off the merger. The proposed Zee-Sony merger aimed to create a media powerhouse in India with over 90 channels covering sports, entertainment, and news.
Sony officially terminated the plans on January 22, stating that the "closing conditions" were not satisfied after two years of negotiations. Sony's notice, highlighted by Reuters, pointed out Zee's failure to make "commercially reasonable" efforts to meet financial thresholds and attributed the decision to a "lack of commercial prudence" by the Indian network.
In the detailed 62-page notice, Sony contended that several breaches of the merger agreement were "not remediable," and any further discussions would be futile, especially given Zee's denial and failure to propose measures to protect Sony's interests. Sony emphasised that the breaches were substantive and not merely procedural or technical.
Zee privately replied on January 23, refuting all of Sony's claims and stating that the Japanese company's request for a $90 million termination fee was legally unsustainable. Zee claimed that the termination was carried out in bad faith and was wrongful, legally unsound, and urged Sony to withdraw its notice.
Despite Zee's shares falling approximately 30% since the deal's collapse, the company's struggles were evident over the years, with a decline in advertising revenues and reduced cash reserves. Sony, in its termination notice, highlighted Zee's cash position as of Sept. 30, significantly below the requirements of the merger agreement.
Reuters had previously reported Sony's concerns about Zee CEO Punit Goenka facing a regulatory investigation for suspected diversion of company funds. Sony's notice cited the "ongoing investigation" as an additional factor.
Sony, in its termination notice, stated that Zee was "unable to realistically assess the timeline required to resolve all the outstanding issues.