Zee Demands ₹750 Crore from Sony for Calling Off $10 Billion Merger

Zee Entertainment Enterprises Ltd (ZEEL) has demanded a $90 million (₹750 crore) termination fee from Culver Max Entertainment Pvt. Ltd. (formerly known as Sony Pictures Networks India) and its subsidiary Bangla Entertainment Pvt. Ltd. (BEPL). This demand stems from their decision to abandon 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 Zeel 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.

"Culver Max and BEPL have failed to comply with their obligations under the Merger Cooperation Agreement (MCA). Therefore, the Company has terminated the MCA and called upon Culver Max and BEPL to pay the termination fee i.e. the aggregate amount equal to $90,000,000, in accordance with the MCA," said Zee in a stock exchange filing.

Sony Group Corporation alleged that ZEEL had not met the merger conditions, and initiated arbitration proceedings against ZEEL before the Singapore International Arbitration Centre (SIAC), claiming $90 million (approximately ₹748.5 crore) as a termination fee. In response, ZEEL initiated legal actions to challenge Sony Group's claims filed before SIAC.

In addition to filing a petition with the Mumbai bench of the National Company Law Tribunal (NCLT) to compel Sony Group to execute the merger plan, SIAC rejected Sony Group's request for a temporary injunction against ZEEL, preventing them from pursuing the NCLT to enforce the failed merger of its subsidiary, Culver Max, with the Indian media company.

After over two years of planning, Sony has scrapped its proposed merger with ZEEL. In a statement released on January 22nd, Sony cited ZEEL's failure to meet closing conditions, even after a one-month extension, as the reason for the termination. ZEEL, however, insists they were prepared to fulfill 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.

Upon completion of the Sony-Zee merger, the consolidated entity would have become the nation's preeminent entertainment network, boasting ownership of over 70 television channels, two video streaming platforms (ZEE5 and Sony LIV), and two film production studios (Zee Studios and Sony Pictures Films India).

Zee recently reported a quarterly profit for the March quarter, reversing a loss incurred a year earlier, due to increased advertising demand and reduced expenses. The company recorded a profit of ₹13.35 crore, a significant improvement from the ₹196 crore loss reported in the corresponding quarter of the previous year.

Domestic advertising revenue experienced an approximate 11% increase year-over-year, attributed to the ongoing recovery in the broader advertising market and increased spending from FMCG clients, as reported by Zee in a filing to exchanges. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margins saw an expansion from 7.2% to 9.7% year-over-year.