Putting an end to two-year-long negotiations, Japan's Sony Group Corp has officially sent a termination letter about the $10 billion mega-merger deal between its India unit, Culver Max Entertainment, and media major Zee Entertainment Enterprises Ltd (ZEE).

The major reason cited behind the termination of the much-hyped deal is the inability to fulfil the merger agreement. A statement from Sony Pictures Entertainment says: “Culver Max Entertainment (CME) today issued notice to Zee Entertainment Enterprises Ltd. (ZEEL) terminating the agreement dated December 22, 2021, to merge ZEEL and CME. 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. 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 company says it remains committed to growing presence in India.

Speculations regarding the deal call off have been rife since last week amid reports about complications in finalising CEO Punit Goenka's role in the new company. However, Sony on January 10, 2023, clarified that talks with Zee would continue till January 20, 2022. Zee had also reiterated its commitment to the merger.

The ZEE board held the final round of talks with Sony Pictures Networks India or Culver Max, on January 18. Following this, Sony's board in Tokyo reported passed a resolution against the deal.

Sony would have held a 53% stake in the merged media and entertainment company if the deal was approved. Zee's market share in the Indian entertainment and broadcasting business is 18%, while of Sony's market share is at 6%.

ZEE shares closed 1.59% down at ₹231.75 on the BSE on Saturday i.e. January 20. The ZEE shares opened a gap up at ₹238.30 and fell to an intra-day low of ₹230.05. At the current share price of ₹231, the ZEE’s m-cap stands at ₹22,260.04 crore. The Zee share has surged 3.19% in the past year but has fallen 18.96% in the year-to-date in January 2024. In the past six months, the share recorded a 4.17% surge.

Although ZEE had received all necessary approvals for the proposed merger with Culver Max, the tiff emerged on whether ZEEL's CEO should lead the new company. Notably, the 2021 agreement signed between both parties had even stated Goenka would head the new company, though developments in the aftermath of the deal might have triggered Sony to change its stance.

Just last month, ZEE had sought more time for the proposed merger.

The $10-billion deal was announced in December 2021 to merge the two big entities to create the largest entertainment network in the country. However, ZEE faced several hurdles and delays due to ongoing legal battles with capital markets regulator SEBI.

In October 2023, in a pause to Goenka, the Securities Appellate Tribunal (SAT) set aside an order barring him from holding key managerial positions in the company and other associated firms. The appellate tribunal, however, directed him to cooperate with the SEBI investigation. So the uncertainty over the outcome of the SEBI probe persists.

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