Sony terminated the proposed $10 billion merger with Zee, citing Zee’s failure to fulfill certain financial terms outlined in the deal and provide a viable plan to rectify the situation, as reported by Reuters.
In response, Zee refuted the allegations in a letter addressed to Sony, and accused the Japanese conglomerate of acting in ‘bad faith’ by calling off the merger.
On January, 22, 2024, Sony Pictures Networks India Private Ltd. (now known as Culver Max Entertainment Limited), a subsidiary of Sony Group Corporation, announced the termination of the definitive agreements with Zee Entertainment Enterprises Ltd. (ZEEL) regarding their proposed merger.
The merger, announced on December 22, 2021, faced delays and unmet closing conditions, ultimately leading to the expiration of the end date.
“The definitive agreements provided that if the Merger did not close by the twenty-four months after their signature date (the “End Date”), the parties would be required to discuss in good faith an extension of the End Date required to make the merger effective by a reasonable period of time. Such discussions were required to be held for a period ending thirty days after the End Date (the “Discussion Period”).The definitive agreements further provided that if the parties are unable to agree upon such an extension by the end of the Discussion Period, any party could terminate the definitive agreements by providing written notice,” said a statement from Sony.
The statement clearly said that though SPNI has been engaged in discussions in good faith to extend the End Date but the Discussion Period has expired without an agreement upon an extension of the End Date.
“As a result, on January 22, 2024, SPNI issued a notice to ZEEL terminating the definitive agreements,” it further read.
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According to reports, Sony’s notification stated that Zee had not made ‘commercially reasonable’ efforts to achieve specific financial benchmarks, particularly concerning cash availability. The decision was influenced by what Sony called Zee’s ‘lack of commercial prudence’.
“The breaches committed by Zee are not ‘procedural or technical’ in nature and will have a substantive impact on the transactions,” Reuters quoted Sony in their report.
In its board meeting the following day after the termination notice was sent to them, Zee, acknowledged communications received from Culver Max Entertainment Pvt. Ltd. on 22nd January 2024.
“ZEEL categorically denies all the assertions raised by Culver Max and BEPL on the alleged breaches under the terms of the MCA (Ministry of Corporate Affairs) including their claims for the termination fee,” the company said in a press statement.
Read More: Zee-Sony Merger End: Zee to take legal action after Sony’s merger termination notice
Naturally, the fallout had a significant impact on Zee’s shares. On January 19, two days before the extended deadline of the merger Zee ended, the stock went up to Rs 244.95. After the termination news became public, it touched a low of Rs 159. In the past one month alone, Zee shares have seen a 43.36 percent drop.
Read More: Merger plans to legal disputes: Sony-Zee saga far from over