Sony Group is considering scrapping the much-anticipated merger between its Indian arm and Zee Entertainment Enterprises culminating in a setback after a prolonged and dramatic two-year negotiation period aiming to create a colossal $10 billion media conglomerate.
Insiders familiar with the matter revealed that the Japanese multinational is poised to pull the plug on the deal due to an impasse regarding the leadership of the combined entity. At the heart of this stalemate is the position of Punit Goenka, the CEO of Zee Entertainment and son of its founder. Although the initial agreement in 2021 designated Goenka as the head of the merged company, Sony is now hesitant to endorse him for the role, especially in light of an ongoing regulatory inquiry.
Sources disclosed that Sony intends to issue the termination notice ahead of the January 20 deadline, citing unfulfilled conditions necessary for finalizing the merger, reported Money Control. Despite prolonged discussions over recent weeks, Goenka has steadfastly insisted on assuming the leadership position, adhering to the initial accord.
The collapse of this deal amidst the leadership dispute not only leaves Zee susceptible to potential financial strain but also occurs at a pivotal moment when Mukesh Ambani's Reliance Industries endeavours to fortify its media aspirations through negotiations with Walt Disney's Indian unit.
The proposed Sony-Zee alliance aimed to forge a formidable $10 billion media powerhouse, capable of rivalling global giants like Netflix and Amazon, along with local heavyweights like Reliance. Zee had previously sought an extension until January 20, while Sony awaited proposals to fulfil the remaining critical conditions for closing the deal.
The Securities and Exchange Board of India had earlier accused Zee of falsifying loan recoveries to conceal private financing deals by its founder, Subhash Chandra, alleging misappropriation of funds. Despite Goenka's reprieve from the regulatory order, Sony perceives the ongoing investigation as a corporate governance concern, as reported by Bloomberg.
Under the 2021 agreement, Sony Pictures Networks India was slated to hold a 50.86% stake in the merged entity, while Goenka's family would own 3.99%. Although regulatory approvals were nearly secured, the termination of this merger thwarts Sony's aspirations to expand its media footprint in India, the world's most populous country.
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