Zee asserted in its Q3 financial statements that it has strong grounds to counter Star India’s claims in the ICC TV rights agreement matter. The company added that it has accrued Rs 72.1 crore for bank guarantee commission and interest expenses for its share of bank guarantee and deposit as per the agreement.
Star India has sent letters to Zee through its legal counsel accusing the company of breaching the ICC TV rights agreement due to the non-payment of $203.5 million in the first installment of the rights fee along with the payment of the bank guarantee commission deposit of Rs 17 crore.
Zee, on the other hand, has accused Star of failing to comply with the agreement due to its inability to obtain necessary approvals and execute necessary documents and agreements.
The company claimed that the agreement was contingent on financial commitments, bank and corporate guarantees, and final ICC approval for the sub-licencing deal.
“The management believes that Star, by its conduct, has breached the Alliance Agreement and is in default of the terms thereof, and consequently, the contract stands repudiated,” Zee said in its note to the financial statements.”The company said it has communicated to Star that the alliance agreement cannot be proceeded with for the reasons set out above and has also sought a refund of Rs 68.54 crore paid to Star,” it added.Zee said it doesn’t anticipate any significant adverse impact from the contract repudiation, and there is no need to make any adjustments to the accompanying statement.
On August 26, 2022, Zee signed an agreement to set out the basis on which Star India would sub-licence the ICC TV rights to the company for men’s and u-19 events for four years until 2027.
It is pertinent to note that the Walt Disney-owned company, which is in merger talks with Reliance Industries’ Viacom18, had acquired the ICC media rights for $3 billion.
As part of its pre-bid understanding with Zee, Disney Star had sub-licenced the ICC TV rights to the company for $1.5 billion. The company retained the ICC digital rights after acquiring the Indian Premier League (IPL) TV rights in the same year.
Zee, which at that time was in the process of merging with Sony Group’s India unit Culver Max Entertainment, had acquired the ICC TV rights since sports would have been a key focus area for the proposed Sony-Zee merged entity.
Sony was expected to infuse growth capital of $1.5 billion into the merged entity, which would have been deployed for content investments in sports and digital.
The merger, which had been in the works for two years, was called off by Sony last month due to Zee’s apparent failure to meet the closing conditions.
Zee’s inability to stick to the ICC TV deal has meant that Star will have to service the entire $3 billion contract, which has put a strain on its valuation and is expected to dent its future profits.
ET had reported that Reliance has reduced Star India’s valuation by up to $2 billion due to anticipated losses from the ICC contract over the next four years.
Star and Viacom18 are nearing the completion of a merger deal that values both entities at $4 billion. Disney purchased Star for upwards of $15 billion as part of its $71 billion acquisition of Rupert Murdoch’s 21st Century Fox in 2019.
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