The deal was announced two years ago, in a bid to create the country’s largest broadcast company.
Two key meetings are set to be held back-to-back, said the people cited. Culver Max Entertainment, formerly Sony Pictures Networks India, is likely to hold a board meeting on Thursday night, followed by Sony at its Tokyo headquarters.
Sony is expected to pass a resolution to end the “good faith discussions,” thereby calling off the planned amalgamation, unless Zee managing director and chief executive Punit Goenka agrees he won’t assume current titles at the merged company.
Bid to Resolve Outstanding Issues
The resolution is also likely to call for all outstanding condition precedents (CPs) to be met. The latter are said to have complicated the already-strained relationship between the two sides.
People close to Zee, however, said negotiations are ongoing, and both sides are trying to resolve all outstanding issues to make the deal work. They added that all operational CPs have been fulfilled.
However, those close to Sony said that even if Goenka agrees to step down on January 19, the various CPs will have to be audited, and final adjustments made to the company’s finances. Since the merger was announced, Zee’s net profit has plummeted to Rs 48 crore in FY23, from Rs 956 crore in FY22 and Rs 793 crore in FY21.
“It is very clear now that Goenka cannot be heading the new company,” said an executive close to negotiations. “If the merger was to go ahead, he has to step down on the day the amalgamation is actually complete and a new merged company is born.”
Sony’s holding in the combined entity is to be 53%. It also agreed to invest $1.6 billion to expand footprint.
On Thursday, Zee Entertainment stock rallied over 7% intraday after a media report suggested Culver Max and Zee had held discussions on completion of the merger, and that Goenka had offered to give up the chief executive role at the merged entity. The scrip ended 1% higher on the BSE, at Rs 248.15 apiece.
People close to Zee said Goenka has made no such commitment. They argue his appointment as MD and CEO of the new company is a key part of the composite agreement. Any change will have to be voted on afresh by shareholders and require approval of the board, the National Company Law Tribunal (NCLT) and the stock exchanges.
There was no communication to the exchanges from Zee in this regard as of press time on Thursday.
“The company does not comment on media speculation,” the Zee Entertainment spokesperson told ET in a written response. Sony Corp’s global spokesperson didn’t respond to queries.
ET reported on January 9 that Sony was on the brink of halting the deal. The next day Zee informed the stock exchanges that the article was “baseless and factually incorrect.” It went on to add, “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.” Sony did not make any official statement to the exchanges.
People close to Sony said the multinational has offered Goenka the role of advisor at the new company, but said he should not be on the board, pending regulatory investigations.
Sony has been rooting for NP Singh, its India MD and CEO, as chief executive of the new entity in the interim, unless Goenka is exonerated in all pending cases.
Sony is not keen on any hostile takeover attempt , said people familiar with the group’s thinking, but it’s frustrated at the numerous delays and regulatory hurdles. Zee still has a market share of 18% in the India entertainment and broadcasting business, compared with Sony’s 6%.
The deal hit a hurdle after the Securities and Exchange Board (Sebi) banned Goenka and his father Subhash Chandra in August from the board of any listed company for a year, for allegedly diverting funds from Zee and the group’s other listed entities to founding shareholders. The Sebi order was overturned by the Securities Appellate Tribunal (SAT) in October 2023.
The merger aims to create a 74-channel powerhouse that will give the Japanese group sizeable market share at a time when consolidation is transforming the media landscape in India.
ET was the first to report on December 25 last year that Reliance and Disney have signed a non-binding term sheet for a 51:49 alliance which they hope to conclude before the fiscal year ends.
