New Delhi/Bengaluru — Japan’s Sony Group has terminated its $10bn merger with Zee Entertainment, according to a source with direct knowledge of the matter. The decision comes after an impasse over who would lead the combined entity, a crucial factor in the highly competitive Indian market. The merger was seen as a strategic move to counter the impending merger between Disney’s Indian businesses and media assets owned by billionaire Mukesh Ambani’s Reliance Industries.
In a letter sent to Zee early on Monday, Sony cited unmet conditions of the merger agreement as the reason for the termination. Bloomberg News reported that Sony is expected to disclose the letter to the exchange later. Both Sony and Zee have declined to comment on the matter.
The merger, initially announced over two years ago, faced obstacles regarding the choice of leadership for the combined company. Zee proposed CEO Punit Goenka, but Sony expressed disagreement due to an ongoing market regulator probe into Goenka.
Zee had previously expressed its commitment to the merger and stated its intention to close the deal through good faith negotiations. The company was seeking to discuss an extension of the January 20 deadline to finalize the merger.
The collapse of the deal is anticipated to have negative consequences for both companies. Scaling up in the Indian market, which is currently experiencing digital disruption, and facing potential threats from increased competition intensity if the Reliance-Disney deal proceeds, were key considerations for both Sony and Zee.
Zee is already grappling with declining profits, advertising revenue, and cash reserves. It faces competition not only from domestic players but also global streaming giants such as Netflix and Amazon.com, who are aggressively expanding their presence in the Indian market.
The broadcaster’s four-year pact with Disney’s Star for TV broadcasting rights of certain cricket events is also at stake if the deal falls through. Analysts estimate that Zee would have to pay $1.32bn to $1.44bn over the tenure of the agreement. Bloomberg News reported that Zee missed an early-January deadline to pay $200m.
Zee shares closed 1.5% lower in a Saturday trading session in Mumbai. The market remained closed on Monday due to a public holiday in Maharashtra state.
As the proposed merger between Sony and Zee comes to an end, both companies will have to reassess their strategies and individually navigate the challenges posed by the highly competitive Indian market.
Please note: The information provided in this news article is based on publicly available sources and should not be seen as financial or investment advice.
