The Zee-Sony merger, announced in December 2021, remains in the spotlight as stakeholders contemplate its current status. The merger has faced a number of challenges since its announcement, including regulatory hurdles and allegations of financial misconduct. As of now, legal experts say it is difficult to ascertain the timeline for completing the merger in the current scenario.
“Several challenges are currently thwarting the completion of the Zee-Sony merger. Foremost among these are the serious allegations of financial misconduct against ZEEL’s CEO Punit Goenka and Subhash Chandra, which have led to a SEBI (Securities and Exchange Board of India) order barring them from key positions in any listed company. The order’s appeal is pending with the SAT (Securities Appellate Tribunal) adding a layer of uncertainty to the proceedings,” explains Sonam Chandwani, managing partner KS Legal & Associates.
Even after SEBI’s interim order Punit Goenka, in a series of media interviews, expressed confidence in the Zee-Sony merger deal announced in 2021, stating that it would create a $10 billion TV enterprise.
However, recent developments have cast doubts on its progress. SAT rejected the stay on SEBI’s order, which bars Punit Goenka and Subhash Chandra, chief executive officer and chairman of Zee Entertainment respectively, from holding significant management positions in publicly traded companies. This setback adds to the existing obstacles. Furthermore, the National Company Law Tribunal (NCLT) has not yet provided a clear verdict, leaving the merger’s fate uncertain.
The sheer size of the merger involving two industry giants comes with its own set of regulatory and procedural baggage and corresponding roadblocks. The ZEE crisis is only here to add to it.
What are the other major roadblocks in the way of this merger?
“Some of the key pending roadblocks that the merger will have to overcome are the proceedings initiated by certain lenders of Essel Group entities (being entities associated with the promoters of Zee). It has also been reported that there are certain proceedings initiated by third parties before SEBI against Zee which are acting as impediments to the completion of the merger,” said Gaurav Mistry, Partner, DSK Legal.
If the proceedings initiated by the lenders of Essel Group entities, where lenders claim to be impacted by the pay-outs emanating from the merger, are given preference over the merger process itself, there could be a possibility where these lenders will have to be settled – as was observed in the case of IndusInd Bank (a lender of Zee) who was repaid earlier this year.
Mistry also said that it is difficult to predict the precise timeline for the completion of the merger.
“As of now, the merger has some dependency on the outcome of the various issues tagged with the merger itself. Whether these are considered to be imperative for approving the merger or are set to be dealt with dehors the merger will actually determine the timelines for completion of the merger,” Mistry added.