Sony cited the conditions of the merger agreement, which had not been met, as the reason for the termination.
Sony Group Corp. has Zee Entertainment Enterprises Ltd. has officially announced that it plans to call off the merger between its Indian unit and the media network. This ends a two-year takeover saga and leaves Zee vulnerable to competition as competition intensifies.
The Japanese entertainment giant sent a termination letter to Zee early Monday and is expected to float it to the stock market later, said people familiar with the plan, who spoke on condition of anonymity because the announcement is not yet public.
Sony cited non-performance of the merger agreement as the reason for the termination, according to the letter obtained by Bloomberg.
A Sony spokeswoman declined to comment. A representative for Zee did not immediately respond to a request for comment.
The move follows a standoff between the companies over whether Zee's chief executive Punit Goenka would lead the combined company while India's capital markets regulator investigates his conduct. The standoff now appears to have scuppered the deal that would have created a $10 billion media giant with the financial muscle to take on global giants Netflix Inc. and Amazon.com Inc.
Bloomberg News reported on January 8 that Sony planned to call off the merger as the two sides failed to resolve the leadership dispute. Zee later said they were still in discussions about completing the merger.
If Goenka is ousted from Zee, whose financial health has deteriorated, Sony may reconsider another merger proposal, according to one of the people. Zee's profit for the fiscal year ended March 31 fell 95% to 478 million rupees ($5.8 million) compared to the previous period.
Payment deadline
Sony's termination letter came after a 30-day grace period expired over the weekend when both sides failed to agree on a late December deadline.
The last-round leadership dispute was the biggest hurdle to the deal – Zee insisted that Goenka would lead the new company as agreed in the 2021 pact, while Sony had concerns about his appointment given the regulatory investigation against him.
The Securities and Exchange Board of India alleged in June that the Mumbai-based media house faked the repayment of loans to cover private financing deals by its founder Subhash Chandra. Chandra and his son Goenka “abused their position” and siphoned off funds, SEBI said in an interim order barring Goenka from appointing officers or directors in listed companies.
While Goenka got a stay from an appellate body against the Sebi order, Sony viewed the ongoing probe as a corporate governance issue, Bloomberg reported earlier.
The failed deal, which had received almost all regulatory approvals, would have created an entertainment giant in which Sony would own a 50.86% stake while Goenka's family owned 3.99%.
Sony, which now needs to reshape its media plans for the world's most populous country, should benefit from Zee's extensive content library in regional Indian languages and its offering of dozens of local TV channels.
Zee not only faces financial vulnerability and investor anxiety but will also face stronger rivals as Reliance Industries Ltd. and Walt Disney Co. are continuing their talks to combine their media operations in India.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)