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Business News/ Companies / News/  Sony-Zee merger in turmoil over leadership dispute, claims report
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Sony-Zee merger in turmoil over leadership dispute, claims report

Both parties want their respective chiefs -- namely NP Singh, MD & CEO of Sony India, and Punit Goenka, MD & CEO of ZEEL, to helm the merged media company. The disagreement has stalled development even as the December 21 deadline looms.

File Image: Punit Goenka, Managing Director and CEO of Zee Entertainment Enterprises Limited in Mumbai (Photo Abhijit Bhatlekar/ Mint)Premium
File Image: Punit Goenka, Managing Director and CEO of Zee Entertainment Enterprises Limited in Mumbai (Photo Abhijit Bhatlekar/ Mint)

Sony Pictures Networks India (Sony) and Zee Entertainment Enterprises (ZEEL) are facing hurdles in finalising their proposed merger due to a deadlock over leadership arrangements for the merged entity, as per a report in the Financial Express.

Bone of contention

Both parties want their respective chiefs – namely NP Singh, MD & CEO of Sony India, and Punit Goenka, MD & CEO of ZEEL, to helm the merged media company. The disagreement has stalled development even as the December 21 deadline looms.

Also Read: Sony's googly on CEO may stump Zee merger

Sony is "not agreeable" to Zee's position, the FE report added. It noted that the biggest bone of contention is the now overturned Securities and Exchange Board of India's (SEBI) ban on Goenka.

The regulator had banned Goenka and Essel Group chairman Subhash Chandra from holding directorships in Zee Group companies due to an ongoing probe into allegations of fund diversion by Goenka.

Sony did not respond to queries and ZEE declined to comment, the report added.

A letter from Sony clarifying its stand is likely sometime next week, as per a Bloomberg report.

Also Read: Sony+Disney might make better sense than Sony+Zee

Merger structure

As per the arrangement initiated two years back, Goenka is designated to lead the merged entity, with Sony holding a 50.86 percent stake. ZEEL promoters (Goenka family) are expected to hold a 3.99 percent stake, while the remaining 45.15 percent will be with public shareholders.

However, Sony now appears hesitant to comply with Zee's stance, particularly given the circumstances surrounding Goenka.

If the merger proceeds as planned, ZEEL will be delisted from stock exchanges, becoming Sony-Zee, where 100 shares of Zee will convert to 85 shares of the merged entity for shareholders.

ZEEL's stance so far

In a recent regulatory filing, ZEEL said it is "committed" to ensuring the successful closure of the proposed merger. Speaking to investors, Goenka said there is active engagement between the media company and Sony to ensure the implementation of the merger with its Indian unit.

ZEEL's FY23 annual report disclosed an expenditure of 176 crore towards merger-related costs. Despite this, sources suggest ZEEL is committed to the merger scheme initiated two years ago and is reluctant to backtrack from the arrangement.

ZEEL on November 29 said it is "working towards the successful closure of the proposed merger" and media reports suggesting the risk of collapse are "factually incorrect", as per a PTI report.

"We wish to reiterate that the company is continuing to work towards a successful closure of the proposed merger as per the composite scheme of arrangement approved by the NCLT, Mumbai Bench," ZEEL said in a regulatory filing.

Background

In a significant development this August, the National Company Law Tribunal (NCLT) sanctioned the merger between ZEEL and Culver Max Entertainment, formerly known as Sony India. Despite the approval, no specific timelines were outlined. Nearly two years have elapsed since the merger announcement.

Also Read | Zee-Sony merger: NCLAT transfers all cases to the bench led by chairperson

Upon completion, the amalgamated company will command an extensive portfolio encompassing more than 70 TV channels, alongside ownership of two prominent video streaming services, ZEE5 and Sony LIV. The combined entity will also possess two film studios, Zee Studios and Sony Pictures Films India. Once done, the merged conglomerate would be the largest entertainment network across India.

Crucially, the proposed merger has already been approved by ZEEL's shareholders and received regulatory approval from sectoral bodies, including the Competition Commission of India.

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Published: 30 Nov 2023, 09:45 AM IST
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