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Japan’s Sony said on Monday it had abandoned the planned merger of its local subsidiary with Indian media giant Zee Entertainment Enterprises in India, a bitter conclusion to two years marked by tense negotiations between the two parties.
Sony’s Indian subsidiary and Zee Entertainment announced in late 2021 their intention to merge to create an entertainment giant in the country that can compete with streaming leaders such as Netflix, Amazon and Disney and is valued at around $10 billion .
But the conditions of this agreement were “not fulfilled” before the deadline, the Japanese company wrote in a press release. According to media reports, he was gloomy about the decline in Zee’s financial results since the merger was announced.
Zee Entertainment said in a statement that it had been informed of its decision by Sony and that the Japanese company was seeking $90 million in termination fees “due to alleged breaches of the terms of the contract.”
The Indian group “categorically rejects all claims and allegations” by Sony and “will take all necessary measures to protect the interests” of its shareholders, “including by taking appropriate legal action,” he stressed.
Sultry reputation
Under the terms of the original agreement, Sony was to acquire the majority of the capital of the new group (50.86%), which was to be listed on the Indian Stock Exchange, while Zee’s founding family was to hold around 4%.
The agreement also stipulated that Punit Goenka, head of Zee and the founder’s eldest son, would take over the leadership of the new group.
Sony changed its mind in particular due to the increasingly poor reputation of Mr. Goenka, who is the subject of an investigation by the Indian Revenue Service into allegations of misuse of company assets.
Mr. Goenka “had agreed to step down in the interest of the merger,” Zee Entertainment said on Monday. However, the group wanted an independent process to be put in place to find a general director for the new group. Sony, for its part, wanted to put NP Singh, the head of its Indian subsidiary, in charge.
“The deal that I have been thinking about and working on for two years has failed despite my most honest efforts,” Mr. Goenka reacted on social network X.
According to Indian daily The Economic Times, Sony was also upset that it was not included in the loop of a strategic cricket match broadcast licensing agreement that Zee signed with Disney in 2022 for around $1.5 billion.
Zee “needs to check his copy”
India’s entertainment market, worth tens of billions of dollars, is already one of the largest in the world and is expected to grow further in the coming years with the mass adoption of smartphones.
The failed deal will leave Sony and Zee more vulnerable at a time when India’s Reliance, led by Asian tycoon Mukesh Ambani, is negotiating a merger with Disney’s Indian unit, according to agency reports. Bloomberg.
Sony clarified in its press release that the impact of the possible acquisition has not been taken into account in its financial results forecasts for the fiscal year ending March 31 and that the group therefore does not expect any impact on its estimates.
Zee, on the other hand, will have to “review its copy” after expecting this merger to be a success, commented Ambit Capital analyst Vivekanand Subbaraman in an interview with AFP, because “Sony wanted to invest $1.3 billion in the merger.”, he emphasizes.
Since the agreement was signed in December 2021, the Indian giant’s shares have fallen more than 30% on the Bombay Stock Exchange, which was closed on Monday for a holiday.
Sony, whose announcement was made official after the stock market closed in Tokyo, rose 1.9% on Monday.
/ATS
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