Sony Pictures Networks India has terminated its merger agreement with Zee Entertainment Enterprises after the “Discussion Period,” to re-evaluate the terms of the agreement elapsed on January 20. 

In a statement released on its website, SPNI said it issued a notice to ZEE, terminating the definitive agreement. “The Merger did not close by the End Date as, among other things, the closing conditions to the Merger were not satisfied by then. 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.”

The end date, referred to by Sony, was 24 months after the signing of the merger agreement between the firms was completed. SPNI and Zee agreed to merge on December 21, 2021 – both firms expected to merge within 24 months of this agreement. 

In a statement shared with businessline, Sony added, “Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date.”

We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences.”

On December 21, 2023, the end date to complete the merger agreement, Zee sought an extension to carry out discussions with Sony to iron out the final details of the merger terms. A key bone of contention had arisen after Sony said that it did not want Zee CEO Punit Goenka to have the MD and CEO position in the merged entity after all. Sony baulked at Goenka’s recent troubles with the regulators, including an investigation by the Securities and Exchanges Board of India, which alleged that Goenka had been misappropriating funds from Zee. 

This became a non-negotiable term for Zee, where Goenka holds a four per cent equity stake. Both firms were not able to reach consensus. Even during the extension or discussion period. The thirty-day grace period to carry out further discussions after the 24 months after the signature period has elapsed. 

Sony does not anticipate any material impact on its consolidated financial results as a result of the termination of the definitive agreements for the Merger, it said. 

It remains to be seen, what this will have on Zee. Experts predicted that Zee’s stock price could tumble by as much as 40 to 50 per cent after this announcement. With markets closed on January 22nd, the impact of Sony’s announcement cannot be ascertained at present. 

Whether this opens up the door for a hostile takeover remains to be seen. Zee’s holdings are fragmented across many institutional investors. This Sunday, businessline reported that institutional investors led by Life Insurance Corporation of India have approached SEBI against Goenka. Institutional investors are also discussing requisitioning an extraordinary general meeting to oust Goenka. 

Meanwhile, as Sony showed no inclination to budge from its desire to terminate the merger agreement, in the days leading up to the January 20 deadline, the Zee camp threatened Sony with a legal case asking it to pay for damages of terminating the merger agreement. 

Sony at present is not obliged to pay any termination fee. The $100 million fee elapsed after the December 21 deadline. However it could face a messy legal initiated by Goenka at the National Company Law Tribunal or the Bombay High Court soon.