Zee still working to close merger with Sony Pictures to become India's largest media house

Zee Entertainment on Tuesday, 9 January, said it is "committed" to the merger with Sony Pictures Networks India and is working towards a "successful closure" of the transaction that will create the country's largest media house worth $10 billion.

The deadline for the merger with Sony Pictures, now known as Culver Max Entertainment Private Ltd (CMEPL), was extended by a month to 21 January. Zee Entertainment Enterprises Ltd (ZEEL) sought the extension under the Merger Cooperation Agreement signed between the two houses two years ago, on 22 December 2021.

'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,' ZEEL said in a filing to the stock exchanges.

The filing was submitted in response to a clarification sought by the bourses on reports that Sony might call off the deal.

On 17 December 2023, the Subhash Chandra family-promoted ZEEL had sought an extension in deadline for completion of the merger from Sony Group Corporation (SGC) firm CMEPL and Bangla Entertainment Pvt Ltd (BEPL) under the agreement. Subsequently, the deadline of 21 December 2023 was extended by another month.

According to industry sources, the fate of the $10 billion merger is hanging by a thread, with the two parties still unable to finalise the deal as the end of the one-month grace period looms.

The parties are yet to come to an agreement over MD and CEO Punit Goenka leading the merged entity, for one thing. Sony has expressed concerns after market regulator SEBI barred him from holding managerial posts at Zee group entities in connection with a fund diversion case.

While SEBI's order has been stayed by the Securities Appellate Tribunal, Sony is not comfortable with Goenka leading the merged entity due to the stringent corporate governance policies that are followed in Japan.

According to reports, under the agreed terms and conditions, Goenka was to lead the merger entity. However, the Sony Group has been insisting on him making way for its Sony Pictures head N.P. Singh.

The majority of the board of directors of the combined entity would be nominated by the Sony Group as well.

According to an industry source, Goenka's leadership of the merged entity is not the only contentious issue either; there are also concerns about the Indian firm being able to meet the other closing conditions.

The proposed merger of ZEEL, BEPL and CMEPL has already received regulatory approvals from the fair trade regulator CCI (Competitions Commission of India), bourses NSE (National Stock Exchange of India) and BSE (Bombay Stock Exchange), shareholders and creditors of the company, however.

In August 2023, the Mumbai bench of the National Company Law Tribunal (NCLT) also gave a go-ahead to the merger.

The combined entity will own over 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.