Zee Entertainment Limited (ZEEL) might file a suit against Culver Max Entertainment (Sony India) claiming damages if the much-awaited merger between the two companies fails to go through by January 20, a report said.
Top company officials informed Hindu Businessline that Zee was compelled to close down certain lucrative ventures in order to adhere to the merger conditions imposed by the Competition Commission of India (CCI). If the merger fails at this stage, it will be a huge loss for Zee.
“For the merger, both Zee and Sony had to comply with certain voluntary structural remedies proposed by CCI. For this, Zee had to divest three Hindi channels, Big Magic, Zee Action and Zee Classic. If the merger fails to go through, this is a loss for Zee,” a company source said.
The deal, which was signed between Zee Entertainment and Sony Pictures Networks India in 2021, had a stipulated period of two years in which the merger was to be completed before December 21, 2023.
The original agreement between Zee and Sony had envisaged $100 million in penalties if either side walked away and failed to fulfill the deal. But this agreement expired on December 21. The two parties had agreed to extend the talks by 30 days and have been trying to seal the much-awaited deal ahead of the January 20 deadline.
As per the report, as the clause in the agreement has expired, Sony may skip paying the penalty if it chooses to dissolve the agreement.
Culver Max Entertainment (then named Sony Pictures Networks India) and ZEEL entered into a non-binding term sheet in 2021 to merge their linear networks, digital assets, production operations and programme libraries.
Earlier this month, it was reported that Sony might issue a termination notice before January 20 as it is no more willing to push the deal.
News agency Bloomberg reported that Sony is planning to call off the $10 billion merger as it was no more comfortable with Pawan Goenka leading the merged entity due to the multiple regulatory probe.
The proposed merger has already received regulatory approvals from the Competition Commission of India (CCI), bourses NSE and BSE, shareholders and creditors of the company.
Sony reportedly started having troubles due to Goenka’s troubles with the markets regulator Securities and Exchanges Board of India and proposed to replace Goenka with Sony India head NP Singh.
Initially, Goenka agreed to the proposal to go through with the merger without him for the top job. He reportedly changed his stance after getting temporary relief on the Sebi investigation after the Securities Appellate Tribunal (SAT) cleared the deal. Goenka now wants to keep the original terms of the agreement.
In June last year, Sebi alleged that Goenka and Zee Group Chairman Subhash Chandra were involved in diverting company funds. But in October, SAT lifted the ban on Goenka which stopped him from holding board positions in Zee Group companies.
At 9.30 am on Wednesday, shares of Zee Entertainment were trading at Rs 255.80, up by 0.93 per cent from its last close.
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