![\"Sony](\"https:\/\/c.ndtvimg.com\/2024-01\/b6igohfo_sony-zee_625x300_29_January_24.jpeg\"\/ "\\"Sony")
<\/div>\n<\/div>\nNew Delhi: <\/b><\/p>\n
Sony scrapped the $10 billion merger of its Indian arm with Zee Entertainment in part because Zee failed to meet some financial terms of the deal and come up with a plan to address them, according to a termination notice reviewed by Reuters.<\/p>\n
India’s Zee denied the allegations in a letter to Sony, also reviewed by Reuters, and accused the Japanese company of “bad faith” in calling off the merger.<\/p>\n
A Zee-Sony merger in India would have created a media powerhouse in the world’s most populous nation with 90-plus channels across sports, entertainment and news.<\/p>\n
But Sony terminated the plans on Jan. 22, saying in a statement it was doing so because “closing conditions” were not satisfied after two years of negotiations. Neither Sony nor Zee made the contents of the termination notice public.<\/p>\n
Reviewed by Reuters, Sony’s notice said Zee had “failed to take commercially reasonable” efforts to meet some financial thresholds, including with regards to cash availability, while a “lack of commercial prudence” by the Indian network contributed to its decision.<\/p>\n
In the 62-page notice, Sony said several breaches of the merger agreement were “not remediable and any further attempts to mutually discuss would be an empty formality, especially given … plain denial (by Zee) and failure to provide a proposal to protect” Sony’s interests.<\/p>\n
“The breaches committed by Zee are not ‘procedural or technical’ in nature and will have a substantive impact on the transactions,” Sony said.<\/p>\n
Zee responded privately to Sony a day later, on Jan. 23, saying it denied all Sony’s allegations, adding the Japanese company’s demand for a termination fee of $90 million was “legally untenable”.<\/p>\n
The termination was “effected in bad faith” and “is wrongful, bad in law,” Zee wrote in its letter, which asked Sony to withdraw its notice.<\/p>\n
A Zee spokesperson declined to comment, while Sony did not respond to Reuters queries.<\/p>\n
Zee’s shares have fallen about 30% since the deal collapsed.<\/p>\n
Its business has struggled over the years. Zee’s advertising revenues fell to $488 million for the 2022-23 financial year from around $600 million five years earlier. Cash reserves dropped to $86 million from $116 million in that period.<\/p>\n
Sony, in its termination notice, said that Zee’s cash position was 4.76 billion rupees ($57.26 million) as of Sept. 30, adding that was “much below the requirements” of the merger agreement.<\/p>\n
Reuters reported last week that Sony was also concerned about Zee CEO Punit Goenka – who was set to head the merged entity – facing a regulatory investigation for suspected diversion of company funds – allegations he has denied. The “ongoing investigation” was cited in Sony’s notice.<\/p>\n
Zee was “unable to realistically assess the timeline required to resolve all the outstanding issues,” Sony’s termination notice stated.<\/p>\n
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)<\/i><\/p>\n<\/div>\n