Sony Pictures Entertainment (SPE) has broken its silence on the planned merger of Sony Pictures Networks India with Zee Entertainment Enterprises, asserting that it does not take the market regulator’s interim order lightly.
“There have been several erroneous press reports recently speculating about the future of ZEE’s planned merger with SPNI following SEBI’s interim order against Subhash Chandra and Punit Goenka,” Sony said in a statement on June 21. “We take very seriously the SEBI interim order and will continue to monitor developments that may affect the deal.”
The Securities and Exchange Board of India, in an interim order on June 12, banned Essel Group chairman Subhash Chandra and his son Goenka from holding any directorial or key managerial position for siphoning funds from Zee for their own benefit. Goenka was supposed to be the MD and CEO of the merged entity.
Experts said they do not foresee cancellation of the deal but indicated there would be increased scrutiny as the case progresses.
Clean slate
According to Shashank Agarwal, an advocate of the Delhi high court, Sony’s statement reaffirms its commitment to comply with the law and keep the interests of its stakeholders paramount. Sony has reassured its investors that it will monitor the developments arising out of SEBI’s orders.
“As far as the merger deal is concerned, there does not seem to any material impact… as the merger is between the shareholders and other stakeholders of the companies – unless there is anything that suggests continuing with the current directors, in which case, appropriate safeguards will have to be made vis-à-vis the concerned director(s) and his actions,” Agarwal said.
The Zee-Sony merger was expected to conclude by the first half of FY24.
“The merger announced in 2021 had a vision of creating a $10 billion television enterprise,” said Paritosh Dhawan, another Delhi high court advocate. “The merger has the capacity to change the television industry. Therefore, like any other transaction, the companies would prefer to have a clean slate to avoid legal uncertainties.”
According to Dhawan, while Sony won’t step back from the merger, it will scrutinise proceedings before the Securities Appellate Tribunal to safeguard its interests.
Avi Kalra, founding partner of Clergy & Wisemen, a law firm, said even though the SEBI order does not legally prevent the merger, its existence creates a cautious environment, leading to a probable delay in the merger as the companies await a resolution or clarification of the situation.
Zee has been swift in availing its legal remedies and approached the Securities Appellate Tribunal, challenging the SEBI order. Zee’s stand is that SEBI passed an ex-parte order solely on the basis of bank statements to prove allegations of roundtripping of funds.
The tribunal did not grant a stay on SEBI’s order. The next hearing is scheduled for June 26.
“Zee Entertainment Enterprises and its legal team should prioritise obtaining a favourable order from the Securities Appellate Tribunal and seek a stay over the impugned order issued by SEBI. Such an outcome would be crucial in instilling confidence in Sony regarding the future merger between Zee and Sony,” said Kalra.
According to legal experts, Zee’s objective should be to resolve the legal uncertainties as quickly as possible to minimise any potential adverse impact on the merger.