Sony Pictures Networks India (Sony) and Zee Entertainment Enterprises (ZEEL) are facing hurdles in completing their proposed merger due to deadlock over leadership arrangements for the merged entity, according to a report in the Financial Express.
A bone of contention
Both the parties want their respective chiefs – namely NP Singh, MD & CEO of Sony India, and Punit Goenka, MD & CEO of ZEEL, to head the merged media company. The disagreement has stalled development even as the December 21 deadline looms.
Also Read: Sony CEO’s googly may prevent Zee merger
Sony “does not accept” Zee’s position, the FE report added. It noted that the biggest bone of contention is the now overturned Securities and Exchange Board of India (SEBI) ban on Goenka.
The regulator has barred Goenka and Essel Group chairman Subhash Chandra from holding directorships in Zee Group companies amid an ongoing probe into allegations of fund diversion by Goenka.
Sony did not respond to queries and ZEE declined to comment, the report added.
A letter from Sony explaining its stand is likely sometime next week, according to a Bloomberg report.
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Fusion structure
Under the arrangement initiated two years back, Goenka has been appointed to head the merged entity, where Sony holds a 50.86 percent stake. ZEEL promoters (Goenka family) are expected to hold 3.99 percent stake, while the remaining 45.15 percent will be with public shareholders.
However, Sony now seems hesitant to abide by Zee’s stance, especially given the circumstances surrounding Goenka.
If the merger goes ahead as planned, ZEEL will be delisted from stock exchanges, becoming Sony-Zee, where 100 shares of Zee will convert into 85 shares of the merged entity for shareholders.
ZEEL’s stance so far
In a recent regulatory filing, ZEEL said it was “committed” to ensuring the successful completion of the proposed merger. Speaking to investors, Goenka said there is active engagement between the media company and Sony to ensure the implementation of the merger with its Indian unit.
ZEEL’s FY23 annual report revealed an expenditure of ₹176 crore towards merger-related costs. Despite this, sources suggest that ZEEL is in favor of the merger scheme initiated two years ago and is reluctant to withdraw from the arrangement.
ZEEL on November 29 said it is “working towards the successful completion of the proposed merger” and media reports suggesting the risk of collapse are “factually incorrect”, according to a PTI report.
“We wish to reiterate that the company continues to work towards a successful completion of the proposed merger as per the composite scheme of arrangement approved by the NCLT, Mumbai Bench,” ZEEL said in a regulatory filing.
background
In a major development this August, the National Company Law Tribunal (NCLT) approved the merger between ZEEL and Culver Max Entertainment, formerly known as Sony India. Despite the approval, no specific timelines were outlined. Almost two years have passed since the merger announcement.
Read also | Zee-Sony merger: NCLAT transfers all cases to the bench headed by chairman
Upon completion, the amalgamated company will command an extensive portfolio encompassing more than 70 television channels, along with ownership of two prominent video streaming services, ZEE5 and Sony LIV. The combined entity will also own two film studios, Zee Studios and Sony Pictures Films India. Once done, the merged conglomerate would be the largest entertainment network in all of India.
Essentially, the proposed merger has already been approved by ZEEL’s shareholders and has received regulatory approval from sectoral bodies, including the Competition Commission of India.
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Updated: 30 Nov 2023, 09:45 IST
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