The proposed merger between Zee Entertainment and Sony could get called off with both sides sticking to their respective stance on the appointment of Punit Goenka as the Chief Executive Officer of the combined entity.

Sources close to the talks confirmed to businessline that there is a high chance that the merger agreement between the two firms will be terminated ahead of the self imposed deadline of January 20.

Sources explained that Sony and Zee are refusing to budge from their asks. Sony does not want Goenka as the MD and CEO of the merged entity due to regulatory overhang. On the other hand Goenka remains adamant that original agreement which envisages him at the top of the combined entity should be honoured. “ If Sony is threatening to walk away from the deal then Zee can also terminate the agreement.. Both parties started the conversation as merger of equals but now it seems like it’s an acquisition by Sony, “ said a source.

The merger was supposed to have been announced by December 20 but differences between the two parties forced them to extend the deadline. In December, Zee said it has received a communication from Sony that it will enter into good faith negotiations Under the terms of the agreement, these negotiations will come to an end after 30 days, that is January 20.

Both firms signed the original binding term sheet in December 2021, after which they got all regulatory clearances for the merger. However, Sony got spooked by Punit Goenka’s troubles with the Securities and Exchanges Board of India and sought to replace Goenka with Sony India head NP Singh.

While Goenka had verbally agreed to go through with the merger without him at the helm, he changed his stance after getting temporary relief on the SEBI investigation by the Securities Appellate Tribunal. Now, Goenka wants to keep the original terms of the agreement

With both entities set on their stance, the merger is definitely at the precipice of a breakdown.

The merged firm was to own over 70 TV channels, two video streaming services (ZEE5 and Sony LIV), and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.

RIL comes into the scene

Discord in this merger comes on the heels of another consolidation that is in the works. Disney and Reliance could be signing a merger agreement, which necessitates Zee and Sony to join hands. However, this is very likely not going to be the case. 

However, Karan Taurani of Elara Capital believes that the merger could still go through. “We continue to believe that the deal is equally important for both entities with competitive intensity growing due to Disney/RIL talks gaining traction Maintain our view the likelihood of the deal going through remains high, Z had made a statement on  20th Dec, 2023 on entering fair negotiations with Sony, which indicates that they too are very much in favour of the deal going through, “ he said.

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