The uncertainty surrounding the long-awaited Zee-Sony merger has escalated manifold, following some recent developments. Zee Entertainment Enterprises Ltd. (ZEEL) has formally requested an extension to the merger deadline, originally set for December 21.
This development adds another layer of complexity to a deal that was already on shaky ground. The pivotal question of leadership for the newly merged entity remains unanswered. Zee’s Chief Executive Officer (CEO), Punit Goenka, even refrained from addressing it during the company’s Annual General Meeting (AGM), held on December 16.
Anticipation is mounting, not only regarding the leadership of the merged company but also concerning the overall fate of the deal.
Many see the deal falling apart if an understanding is not reached between both parties.
“Zee Entertainment’s request for an extension of the deadline to close the merger with Sony Pictures Networks India (Culver Max Entertainment) has thrown the future of the deal into some uncertainty. While Zee claims the extension won’t affect regulatory compliances, delays may prolong the process, adding to the jitters of already nervous minority stakeholders,” said corporate law litigation expert Vipul Jai, partner at PSL Advocates and Solicitors.
According to Jai, Sony could either agree to the request for an extension to demonstrate its flexibility and commitment to the deal, enabling Zee to address the issues, or they could use this request to renegotiate the terms, potentially seeking the appointment of one of its candidates at the helm of the merged entity.
Despite the initial agreement stating that Punit Goenka, MD and CEO of ZEEL, would assume the leadership of the merged entity, Sony Group Corp has been advocating for NP Singh, its India MD and CEO, to take over as the CEO of the newly formed Zee-Sony entity. According to Sony, this change aligns with stringent corporate governance norms in Japan and the US.
As per the arrangements of the $10 billion merger, Sony Pictures Networks India (SPNI) would hold 50.86 percent of the company, Zee’s promoters 3.99 percent, and the remaining 45.15 percent was to be allocated to the public shareholders.
In the last couple of days, there have been some significant movements at Zee.
First, there was the departure of Adesh Kumar Gupta, a non-executive, non-independent director, from the board, citing personal reasons. This was an unexpected move that caused brief market volatility. Then there was the appointment of three independent directors: Venkata Ramana Murthy Pinisetti, Shishir Babubhai Desai, and Uttam Prakash Agarwal.
How does this impact the merger?
Siddharth Joshi, Senior Associate at SKV Law Offices, explained.
“The appointment of three independent directors is crucial, as the same would have a bearing/effect on the selection of the CEO of the merged entity, which is the reason for seeking a further extension by Zee to complete the merger as approved by the National Company Law Tribunal (NCLT),” he said.
In August 2023, NCLT gave its approval to the much-awaited merger.
According to Joshi, another development that has disrupted and delayed the merger of the companies is the order passed by the Securities Appellate Tribunal (SAT), setting aside the Securities and Exchange Board of India (SEBI) order barring Punit Goenka from heading the board of the listed companies or an entity formed through the merger.