After calling off the proposed merger on Monday, the differences between Zee Entertainment Enterprises Ltd (ZEEL)and Sony snowballed into a war of words, with both sides claiming damages for the failed deal. While Sony has initiated arbitration proceedings against Zee to recoup the $90-million termination fee alleging breach of agreement, the Indian media company blamed the Japanese firm for failing to consummate the $10-billion deal.

“ZEEL’s Board of Directors is evaluating all the available options. Basis the guidance received from the Board, ZEEL will take all necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max (Sony Pictures Networks India) claims in the arbitration proceedings,” said Zee in a statement

The termination of the agreement came more than two years after Zee and Sony agreed to merge formally on December 21, 2021. One of the key points of disagreement was having Zee promoter Punit Goenka in the merged entity.

However, on Monday, Zee revealed that Goenka had offered to step down to push through the merger. “ZEEL proposed an extension of a maximum period of six months for consummation of the transaction; however, Culver Max did not provide any counter proposal for extension,” said Zee in its statement. Sony did not reply to businessline’s queries on why it did not accept Zee’s offer.

businessline had reported last week that Zee is planning to take Sony to court to recoup compensation from the firm after it had to shut down three channels as part of structural changes required by the Competition Commission of India. “Sony’s $90-million termination fee could be in response to Zee’s likely suit,” a legal expert told businessline. 

Goenka, who was at Ayodhya when Sony formally broke off the deal, invoked Lord Ram by saying: “The deal that I have spent two years envisioning and working towards had fallen through, despite my best and most honest efforts. I believe this to be a sign from the Lord.”

uncertain zone

This puts the future of Zee and Sony in an uncertain zone in the changing Indian media landscape. Analysts said the two could explore other options with Disney, Reliance and the Adani Group. Speculation about a possible deal between Zee and Adani are already doing the rounds after Sanjay Pugalia, CEO & Editor in Chief- Media Initiatives in Adani Enterprises posted a picture with Goenka from Ayodhya.

For now though minority shareholders of Zee are concerned about the eroding share value. businessline had reported earlier that a group of institutional investors were discussing plans to call a shareholders’ meeting to oust Goenka. Those plans are on hold according to a person working at one of the mutual funds with stake after Zee clarified that Goenka had offered to step down to complete the merger.

Shriram Subramanian of InGovern said: “The requisition for EGM is justified as shareholders are unsure as to why the Board of Zee and the promoters let the deal collapse. Shareholders have been angry with the company for a number of years now, and were hoping that this merger would herald a new beginning for the company.”

With inputs from Anshika Kayashtha

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