After more than two years of negotiations, Sony has officially called off its proposed US$10 billion merger between its India operations with Zee Entertainment Enterprises. The Japanese group said in a statement on Monday that it had sent a termination letter to Zee after a tense weekend of negotiations failed to salvage the deal.
According to The Financial Times, the talks collapsed at the weekend following the Japanese group’s refusal to allow Punit Goenka, the current CEO of Zee Entertainment Enterprises, to stay on after the merger. Sony’s issues with the merger included an investigation by India’s markets regulator into fraud allegations against Goenka.
Sony was also concerned about Zee’s financial performance, which has been hit by rising streaming costs and a soft advertising market. Zee Entertainment Enterprises' operating revenues fell in the 2023 fiscal year, while earnings before interest, tax, depreciation, and amortization fell 38% because of higher content costs.
"Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline," Sony Pictures Entertainment said in a statement. "After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date," the firm added.
At the same time, Zee said it had also received a demand from Sony for a US$90 million termination fee over “alleged breaches” of the terms of the deal. The Indian company said it “categorically denies” Sony’s assertions and “will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action" against Sony.
Initially, the deal was intended to combine Zee Entertainment Enterprises and Sony’s linear TV networks, digital assets, production operations, and program libraries, creating a US$10 billion entertainment powerhouse in the world’s fastest-growing large economy.