Sony demands $90 million termination fees from Zee after unsuccessful merger

Sony Pictures Networks India, along with Bangla Entertainment (BEPL), is currently pursuing a termination fee amounting to 90 million dollars after the failed merger. Culver Max issued a termination notice to ZEEL.

Initially, the agreement stipulated a penalty clause of 100 million dollars to be paid by either party if the deal fell through. However, this provision became null and void after December 21, as per reports. Presently, Culver Max is seeking the aforementioned termination fee of 90 million dollars, citing alleged breaches of the terms of the MCA by ZEEL. Culver Max has initiated arbitration proceedings and is requesting interim relief against Zeel.

The highly anticipated mega-merger between Zee Entertainment Enterprises Ltd (ZEEL) and Sony Pictures Networks India (SNPI) came to an abrupt end on January 22, as Sony issued a termination letter officially withdrawing from the amalgamation agreement. The primary reason behind the collapse of the $10 billion deal was the absence of consensus on the leadership of the merged entity. The initial agreement had named ZEEL MD and CEO Punit Goenka as the head. Still, Sony sought reconsideration after Goenka became the subject of a SEBI (Securities and Exchange Board of India) probe.

According to the stipulated terms of the merger, the completion deadline was December 21. However, the failure to reach an agreement extended the grace period by a month, culminating on January 21. In a 62-page termination letter, Sony Pictures Networks India Private Ltd (SPNI) stated that despite good-faith discussions to extend the end date, an agreement was not reached, prompting the issuance of the termination notice.

The timeline of the failed merger began in September 2021 when ZEEL's board granted in-principle approval. The merger deal was officially signed in December 2021, following a 90-day due diligence period, with a two-year timeframe for the amalgamation to take effect. Legal challenges surfaced in February 2022 when IndusInd Bank initiated insolvency proceedings against Zee, alleging default of dues amounting to INR 83.08 crore.

Various milestones followed, including approvals from stock exchanges, the Competition Commission of India (CCI), and legal settlements. However, hurdles persisted, such as IDBI Bank's insolvency plea, regulatory scrutiny on Punit Goenka, and disagreements over leadership. By August 2023, the NCLT approved the merger, but Axis Finance contested the decision in September 2023. Although the ban on Punit Goenka holding directorial positions was lifted in October 2023, Sony sought NP Singh's appointment as the head amid the SEBI probe.

Both companies confirmed ongoing discussions as the merger completion deadline lapsed in December 2023. Ultimately, in January 2024, Sony formally terminated the proposed merger, marking the end of a tumultuous journey for Zee and Sony's ambitious consolidation efforts.