Sony Scrapped $10-Billion Merger Deal As Zee Failed To Meet Financial Terms: Report
Sony has terminated a $10-billion merger deal with Zee Entertainment, citing Zee’s failure to meet certain financial terms of the agreement and lack of a plan to address them. The termination notice, reviewed by Reuters, revealed that Zee denied the allegations in a letter to Sony, accusing the Japanese firm of acting in bad faith by calling off the merger.
Had the merger gone through, Zee and Sony would have formed a media powerhouse in India, operating over 90 channels in sports, entertainment, and news. However, Sony decided to terminate the deal on January 22, stating that the closing conditions were not met after two years of negotiations.
According to reports, Sony’s termination notice highlighted that Zee had not made sufficient efforts to meet financial thresholds, including cash availability. Sony also criticized Zee’s lack of commercial prudence as a contributing factor in its decision.
In a 62-page termination notice, Sony stated that the breaches committed by Zee were not remediable and that further attempts at discussion would be futile. Sony emphasized that Zee’s breaches were not mere procedural or technical errors, but would have a substantive impact on the transactions.
Zee responded to Sony in a private letter on January 23, refuting all of Sony’s allegations and rejecting the Japanese company’s demand for a $90 million termination fee. Zee deemed the termination to be in bad faith and wrongful according to the law, urging Sony to withdraw its notice.
Zee’s shares have plummeted nearly 30 percent since the merger collapsed. The company has faced ongoing challenges in its business operations, with advertising revenues dropping to $488 million for the 2022-23 fiscal year from approximately $600 million five years prior. Additionally, Zee’s cash reserves dwindled from $116 million to $86 million during the same period.
Sony’s termination notice pointed out that Zee’s cash position was significantly below the requirements of the merger agreement, amounting to Rs 4.76 billion ($57.26 million) as of September 30.
As the merger would have formed a media powerhouse in India, this development has attracted significant attention in the business world. The termination of the merger deal has left both Sony and Zee facing the repercussions, with Zee’s shares plunging and the two companies now at odds over the legality of the termination.
It remains to be seen what the future holds for both Sony and Zee as they deal with the fallout from this failed merger attempt.
