ZEE-Sony merger talks back on track? ZEE engages with Sony in last-ditch attempt, says report

ZEE-Sony merger: ZEE shares had seen downward revisions in target prices post the terminated of merger deal by Sony. They are down 37.32 per cent in 2024 so far despite recovering some 15 per cent in the last one month.

Zee Entertainment Enterprises Ltd (ZEEL) is re-engaging with Sony Group Corp in a last-ditch attempt to save the $10-billion mega merger that was officially terminated on January 22, a report by ET citing sources said. To recall, the ZEE stock had seen downward revisions in target prices post the terminated of merger deal by Sony. In fact, ZEE shares are down 37.32 per cent in 2024 so far despite recovering some 15 per cent in the last one month.

CEO Punit Goenka had earlier in the ZEE’s recent analyst call suggested that the termination was reviewed by his board and appropriate steps were taken in consultation with the legal experts, that were in the best interest of all shareholders and stakeholders. ZEE even approached the National Company Law Tribunal (NCLT) to seek directions on the implementation of the scheme, he suggested.

“I certainly wanted the merger to be implemented. In line with this aspiration, we even took several steps towards divestment or closure of profitable businesses in the domestic and international markets. I personally offered several proposals and solutions to Sony, to address their demands, but unfortunately, they remained unaccepted. Since the matter is sub-judice, I would not like to say more and let the law take its own course,” Goenka suggested.

Analysts tracking ZEE said the potential reasons for the deal termination was a drastic change in industry dynamics with a likely deal between Viacom and Disney Star and also a gap in decision-making in Sony’s US and Japan offices. They expected the termination to result in a legal tussle between the two media majors. Emkay Global in fact the termination could spur shareholder activism against the ZEE management.

“It is unclear what path ZEE may take going ahead and there is limited clarity on the long-term outlook of the business,” Motilal Oswal said. ZEE would now draw other suitors for other potential deals, said one brokerage after the deal termination.

ZEE Entertainment (ZEEL) and Sony Group Corporation are re-engaging in talks to salvage their $10 billion merger, two years after it was called off. Representatives from both sides have held meetings in Mumbai, aiming to overcome key differences and reach an agreement within the next 48 hours, according to a report by Economic Times.

The $300 million stumbling block

The biggest hurdle seems to be a $300 million write-off on cricket rights. Sony wants it upfront, while Zee prefers a delay. Leadership tussles also linger, with Punit Goenka, Zee’s CEO, reportedly relinquishing his top spot claim in exchange for an advisory role – though Sony still pushes for him to remain outside the core structure. Adding another layer of complexity, Zee wants any deal to be legally irrevocable, a proposition that makes Sony, wary of unforeseen financial changes, hesitant, the report further added.

Both companies have taken their grievances to legal platforms like the Singapore International Arbitration Centre (SAIC) and the National Company Law Tribunal (NCLT). Zee, through Mad Man Film Ventures, sought NCLT’s intervention to enforce the merger, while Sony countered through its Indian units, challenging the maintainability of Zee’s application and seeking to prevent implementation. Additionally, Sony sought emergency interim relief from the SIAC against Zee, which was denied.

With Thanks Reference to: https://www.businesstoday.in/markets/company-stock/story/zee-sony-merger-talks-back-on-track-zee-engages-with-sony-in-last-ditch-attempt-says-report-418133-2024-02-20 and https://www.livemint.com/companies/news/zeel-sony-in-last-ditch-talks-to-revive-10billion-merger-300-million-write-off-on-cricket-rights-remains-issue-11708397480955.html