A breakdown of the proposed Zee-Sony merger may leave the two parties with limited options on the table, media experts say. While Sony has not replied yet to Zee’s request seeking a second extension to close the proposed $10-billion deal, some analysts see little probability of the merger being salvaged now. They say that Zee may have to find a financial investor in the event if Sony walks out of the deal.
“Much has happened in the last two years, since the proposed merger was first announced. Zee’s alternatives are not much. It may have to tap financial investors in the event if the deal with Sony is called off. At the same time, stock market investors would be disappointed if the merger doesn’t go through,” said Shriram Subramanian, founder and Managing Director (MD), Ingovern; which is a proxy advisory firm, said.
Zee’s stock has risen nearly 4% in the last six months in anticipation of the deal, even as the broader BSE Sensex has risen by about 6% during the same period. Merger talks slowed after differences between Zee and Sony emerged over leadership of the merged entity. At the same time, rivals Disney Star and the Reliance-backed Viacom18 are also looking to merge for which the parent firms signed a non-binding agreement last month.
While Zee’s MD & CEO Punit Goenka got a reprieve from the Securities Appellate Tribunal (SAT) on October 30, 2023, overturning a ban on him by the Securities and Exchange Board of India (Sebi) to hold directorships in Zee group, a regulatory probe over allegations of fund diversion still remain.
Sony has been uncomfortable with this regulatory overhang in view of its corporate governance policies, experts tracking the deal said. It has been pushing the name of its India MD & CEO NP Singh for the top job, which Goenka has opposed.
On Friday, Zee said that it was not aware of any board meeting by Sony on the merger and was working towards a successful closure of the deal. “We cannot comment on any board meeting held or proposed to be held by Culver Max Entertainment, given that these are internal matters of Sony. We are engaged in good faith negotiations with Sony with a view to discuss the extension of the date required to make the scheme of arrangement effective by a reasonable period of time,” the company said.
While the expected completion of the deal was December 21, 2023, Zee had sought a deadline extension on December 20, which was to expire on January 20. This 30-day grace period was included in the merger pact signed in December 2021.
“We believe that the good faith negotiations continue and the merger probability remains high,” Karan Taurani, senior vice-president (Research analyst) at brokerage firm Elara Capital, said. Taurani added that he saw the likelihood of a new CEO being appointed instead of Singh or Goenka to head the merged entity.