Zee Entertainment stock rebounds, gains over 4% as company says Sony merger cancellation report ‘baseless’

Shares of Zee Entertainment bounced back strongly in today’s intraday trade by gaining 4.48%, reaching ₹267.80 apiece, following a 7.64% drop in the previous trading session.

The sharp uptick in shares today is attributed to the company’s clarification regarding media reports suggesting a potential cancellation of the planned merger between Zee Entertainment and Sony Group.

Also Read: Sony may call off $10 billion mega-merger with Zee Entertainment

On Monday, media reports claimed that Sony Group Corp was planning to call off the merger pact of its India unit with Zee Entertainment. The following day, exchanges sought clarification from the company regarding media reports. In response, Zee Entertainment stated that the reports were factually inaccurate.

Also Read: Zee denies Sony breakup news; shares trim losses

“We wish to reiterate that the company is committed to the merger with Sony and is continuing to work towards a successful closure of the proposed merger,” Zee Entertainment said in an exchange filing on Tuesday.

“Sony Group is actively engaged in discussions to merge its Indian subsidiary with Zee Entertainment Enterprises,” the Nikkei reported today, citing people involved in the negotiations. The talks will continue until a January 20 deadline to close the deal, the Nikkei reported.

Also Read: Indian media landscape set for a shake-up, with or without M&As

The deal, which was signed between Zee Entertainment and Sony Pictures Networks India in 2021, has a stipulated period of two years in which the merger was to be completed before December 21, 2023, including regulatory and other approvals, with a grace period of one month to complete the transaction. By January 21, the one-month grace period for extended negotiations will end, as per the media reports.

Trimmed stake

Societe Generale, a financial services company, sold 83,45,179 shares of Zee Entertainment through an open market transaction on Tuesday, according to bulk deal data available with the National Stock Exchange. The shares were sold at an average price of ₹259.10 apiece, taking the deal value to ₹216.22 crore.

Fresh headaches for Zee Entertainment

Zee Entertainment Enterprises has missed a deadline to pay $200 million to Walt Disney Co.’s India unit for TV rights to cricket matches, Bloomberg reported today, citing people familiar with the matter.

“The Mumbai-based media firm didn’t pay the installment due in early January, citing a cash crunch. Disney has sought an explanation from Zee on why the payment was skipped,” they said, adding the tranche was part of the over $1.4 billion Zee agreed to pay for the license agreement signed in August 2022, Bloomberg report said.

Also Read: Disney, Reliance sign non-binding agreement for Indian media operations merger

Bloomberg further reported, citing the above mentioned people, that defaulting on the payment to the Disney unit poses fresh headaches for Zee, including possible legal wrangles, even as it deals with the fallout of a collapsing merger with the Sony Group. Zee hasn’t furnished bank guarantees for the sum that was to be paid as per the contract, Bloomberg further quoted the people as saying.

Disney Star had entered into a pact with Zee in August 2022 to license exclusive TV rights for International Cricket Council men’s matches in India till 2027, while Disney’s streaming platform in the country retained digital rights for the property, according to an exchange filing then.

At 12:15 PM, the stock was trading with a gain of 2.6% at ₹263 apiece.

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