Zee demands $90 million in termination fee from Sony for calling off merger
- In Reports
- 11:06 PM, May 23, 2024
- Myind Staff
On May 23, Zee Entertainment Enterprises Ltd (ZEEL) demanded a termination fee of $90 million (approximately Rs 750 crore) from Sony Pictures Networks India, now operating as Culver Max Entertainment Pvt. Ltd., and its subsidiary Bangla Entertainment Pvt. Ltd. (BEPL). This request comes after Sony withdrew from the $10 billion merger deal in January.
“This is with respect to the termination of the Merger Cooperation Agreement (MCA) dated 22 December 2021 between Zee Entertainment Enterprises Ltd and Culver Max Entertainment Pvt. Ltd and Bangla Entertainment Pvt. Ltd…and the Company’s application before the National Company Law Tribunal, Mumbai seeking directions to implement the Composite Scheme of Arrangement and the withdrawal of the said application. We hereby wish to inform you that the Company has, on account of Culver Max’s and BEPL’s breaches under the MCA, terminated the MCA and sought a termination fee from Culver Max and BEPL in accordance with the provisions of the MCA,” Zee has said in a letter to the exchanges.
Sony Group Corporation stated that ZEEL did not meet the conditions for the merger and subsequently initiated arbitration proceedings with the Singapore International Arbitration Centre (SIAC), seeking a termination fee of $90 million (approximately Rs 748.5 crore).
ZEEL had also initiated legal actions to contest the claims of USD 90 million filed by Sony Group before SIAC.
Additionally, Sony Group had filed a petition before the Mumbai bench of the National Company Law Tribunal (NCLT), requesting a directive for Sony Group to execute the merger scheme. SIAC also rejected Sony Group's request for interim relief against ZEEL, preventing it from approaching the NCLT to enforce the unsuccessful merger of its subsidiary Culver Max with the Indian media company.
Over two years after initially announcing their proposed merger, Sony declared the termination of the deal on January 22, citing ZEEL's failure to fulfill closing conditions, despite extending the closing period by a month. However, ZEEL has maintained that it was willing to meet most of the conditions.
The Mumbai bench of NCLT on August 10, 2023, approved the scheme of merger of ZEEL with Sony group entities Culver Max Entertainment and BEPL, which could have created a $10 billion media entity.
If the Sony-Zee merger was completed, the combined entity would have owned over 70 TV channels, two video streaming services -- ZEE5 and Sony LIV -- and two film studios -- Zee Studios and Sony Pictures Films India -- making it the largest entertainment network in the country.
In the past few weeks, Zee has been on a mission to restructure the business, reduce costs and improve its EBITDA margins.
Punit Goenka, managing director and chief executive officer, has taken a 20% pay cut himself and also announced a 15% reduction in overall headcount.
The company has also seen a series of senior-level exits, including Rahul Johri, president of business; Punit Misra, president of content and international markets; Nitin Mittal, president and group chief technology officer; and Shariq Patel, chief business officer, Zee Studio.
Zee recently announced a quarterly profit for the March quarter, a significant turnaround from a loss reported in the same period a year earlier. This improvement was attributed to robust demand for advertising and a reduction in expenses. The company recorded a profit of Rs 13.35 crore, marking a notable shift from the Rs 196 crore loss reported in the corresponding period last year.
Domestic advertising revenue for the quarter rose nearly 11% year-on-year, driven by the continued recovery in the macro advertising environment and spending pickup by FMCG (fast-moving consumer goods) clients, Zee said in a filing with exchanges.
Image source: Reuters
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