After Japanese entertainment giant Sony Corp terminated the $10-billion merger deal with ZEE Entertainment Enterprises Ltd (ZEEL), the Punit Goenka-led company in its board meeting today denied “all the assertions raised by Culver Max and BEPL on the alleged breaches” under the terms of the agreement, including its claims for “termination fee”.

The company says its board today took on record communications received from Culver Max Entertainment Pvt. Ltd. (formerly Sony Pictures Networks India) and Bangla Entertainment Pvt. Ltd. (BEPL) on January 22, 2024, purporting to terminate the merger pact signed on December 21, 2021. They have also sought a termination fee of $90,000,000 from Zee on account of “alleged breaches” of the agreement, invoking arbitration and seeking interim reliefs.

The Zee board says the efforts and steps taken by it were in line with the merger agreement, as approved by its shareholders and all regulatory authorities, and in the interest of the shareholders. “ZEEL held several deliberations and good faith negotiations with Culver Max and BEPL, to consider an extension of the merger completion timeline, that did not materialise,” says Zee.

The company says Punit Goenka, MD & CEO of ZEEL, was “agreeable” to step down in the interest of the merger. The proposals in this regard were discussed, including for appointment of a director on the board of the merged company, protections for the conduct of pending investigations and legal proceedings in the best interest of ZEEL’s directors and shareholders and the consequent modifications to the scheme to incorporate the same.

In this first reaction to the development, Punit Goenka, who's in Ayodhya for the Ram Temple inauguration ceremony today, says he thinks it is a "sign from the Lord". "As I arrived at Ayodhya early this morning for the auspicious occasion of Pran Pratishtha, I received a message that the deal that I have spent 2 years envisioning and working towards had fallen through, despite my best and most honest efforts. I believe this to be a sign from the Lord. I resolve to move ahead positively and work towards strengthening Bharat’s pioneering M&E Company, for all its stakeholders."

On the future path, the ZEE board says it is evaluating all the available options, and could also take legal action against Sony. “Basis the guidance received from the Board, ZEEL will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings.”

ZEE’s agreement with Culver Max and BEPL was approved by the Mumbai bench of the National Company Law Tribunal (NCLT) in August 2023.

Under the pact, ZEEL says it had exercised its right to require Culver Max and BEPL to enter into “good faith negotiations” for 30 days to arrive at a “mutual agreement” on the extension of the end date by a “reasonable period” for the completion of the transaction.

“During this period, despite conducting numerous deliberations in good faith, the parties failed to arrive at a consensus on the purported pending conditions precedent that required action on the part of both ZEEL and Culver Max, BEPL under the terms of the MCA,” alleges Zee.

ZEE says it also proposed an extension of a maximum period of six months for the consummation of the transaction, however, Culver Max did not provide any counter-proposal. “These discussions did not result in any proposal from Sony but they rather have chosen to terminate.”

R. Gopalan, chairman, ZEE, says the board has taken note of Sony’s letters purporting to terminate the agreement. “We are evaluating the next steps and considering the appropriate course of action…the board would like to assure its stakeholders that the Company will take all the necessary actions, in the best interest of all stakeholders.”

During the course of merger talks, Zee says it also took “permanent and irreversible steps”, resulting in one-time and recurring costs for it. Despite this, says the company, it will continue to evaluate “organic and inorganic opportunities” for growth.

Putting an end to two-year-long negotiations, Sony today terminated the $10 billion mega-merger deal with Zee, citing the inability to fulfil the merger agreement. “After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date,” Sony says in a statement.

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