- Governance, Risk & Compliance
- 3 min read
Zee Entertainment sends letter to Sony Group Corporation, requesting an extension of cutoff to complete merger
The cut-off date for concluding the merger is December 21. Zee had inked a deal to merge with Sony's India Culver Max Entertainment in December 2021. While the merger has received all the requisite approvals, differences have cropped up between the two over the CEO position.
Zee Entertainment Enterprises Limited (ZEEL) has requested the Sony Group Corporation-owned Culver Max Entertainment Private Limited (CMEPL), formerly known as Sony Pictures Networks India, and Bangla Entertainment Private Limited (BEPL) to extend the date required to make the merger scheme effective as the December 21 cut-off date looms large.
Sources aware of the development say that the company has written a letter to Sony to extend the cut-off date. Once Sony agrees to extend the cut-off date, the two parties will jointly decide the new cut-off date.
"We hereby inform you that pursuant to the Merger Cooperation Agreement dated December 22, 2021, entered into amongst the companies BEPL and CMEPL, the company has requested CMEPL and BEPL to extend the date required to make the scheme effective, as per the terms of the Merger Cooperation Agreement," ZEEL said in a regulatory filing on Sunday.
Elara Capital SVP and media analyst Karan Taurani said the probability of the merger going through remains high. "As per our assessment, extension in the merger timeline won’t have a major regulatory hurdle, as the NCLT approval is not time-bound, and this is only a mutually agreed date between two parties subject to shareholder and Board approvals; further appeals filed by Axis and other lenders in NCLAT too won’t negatively impact merger, as NCLT approval is without any conditions," he stated.
Incidentally, the company sent a letter to Sony a day after its annual general meeting (AGM) on Saturday, where two of its special resolutions to reappoint Vivek Mehra and Sasha Mirchandani as independent directors were rejected by the shareholders.
On December 14, Adesh Kumar Gupta decided to quit as the non-executive, non-independent director of ZEEL. Gupta was also part of the Special Merger Implementation Committee, which was formed to oversee the company's merger with Sony and includes key ZEEL officials like Punit Goenka, who is the MD & CEO.
The Sony-Zee merger has received all the key approvals, including from the Competition Commission of India, the National Company Law Tribunal, and the stock exchanges. However, differences between Sony and Zee over the appointment of Punit Goenka as the proposed merged entity's MD & CEO have delayed the merger.
As reported first by ET, Sony has told Goenka that he can't be the MD & CEO of the proposed entity since he continues to be under the Securities and Exchange Board of India's (Sebi) investigation for alleged misappropriation of funds.
Sony is pushing for the appointment of its long-time India executive, NP Singh, as the CEO of the new entity.
Sony and Zee signed a merger agreement in December 2021. The deal was anticipated to conclude in 8 to 10 months; however, two years down the line, it is yet to be completed due to the cases filed by financial institutions against ZEEL and the Sebi order against the company’s promoters.
Once completed, the merger will lead to the creation of a multibillion-dollar media powerhouse with a leading position in TV, OTT, and content creation. The FY23 financials show that ZEEL and Sony's combined revenue was almost Rs 15,000 crore.
After the merger, Sony would indirectly own 50.86% of the new company, while other ZEEL shareholders would hold a 45.15 percent stake and the ZEEL founders would hold 3.99%. The merged entity will get a fund infusion of $1.5 billion from Sony.
Sources aware of the development say that the company has written a letter to Sony to extend the cut-off date. Once Sony agrees to extend the cut-off date, the two parties will jointly decide the new cut-off date.
"We hereby inform you that pursuant to the Merger Cooperation Agreement dated December 22, 2021, entered into amongst the companies BEPL and CMEPL, the company has requested CMEPL and BEPL to extend the date required to make the scheme effective, as per the terms of the Merger Cooperation Agreement," ZEEL said in a regulatory filing on Sunday.
Elara Capital SVP and media analyst Karan Taurani said the probability of the merger going through remains high. "As per our assessment, extension in the merger timeline won’t have a major regulatory hurdle, as the NCLT approval is not time-bound, and this is only a mutually agreed date between two parties subject to shareholder and Board approvals; further appeals filed by Axis and other lenders in NCLAT too won’t negatively impact merger, as NCLT approval is without any conditions," he stated.
Incidentally, the company sent a letter to Sony a day after its annual general meeting (AGM) on Saturday, where two of its special resolutions to reappoint Vivek Mehra and Sasha Mirchandani as independent directors were rejected by the shareholders.
On December 14, Adesh Kumar Gupta decided to quit as the non-executive, non-independent director of ZEEL. Gupta was also part of the Special Merger Implementation Committee, which was formed to oversee the company's merger with Sony and includes key ZEEL officials like Punit Goenka, who is the MD & CEO.
The Sony-Zee merger has received all the key approvals, including from the Competition Commission of India, the National Company Law Tribunal, and the stock exchanges. However, differences between Sony and Zee over the appointment of Punit Goenka as the proposed merged entity's MD & CEO have delayed the merger.
As reported first by ET, Sony has told Goenka that he can't be the MD & CEO of the proposed entity since he continues to be under the Securities and Exchange Board of India's (Sebi) investigation for alleged misappropriation of funds.
Sony is pushing for the appointment of its long-time India executive, NP Singh, as the CEO of the new entity.
Sony and Zee signed a merger agreement in December 2021. The deal was anticipated to conclude in 8 to 10 months; however, two years down the line, it is yet to be completed due to the cases filed by financial institutions against ZEEL and the Sebi order against the company’s promoters.
Once completed, the merger will lead to the creation of a multibillion-dollar media powerhouse with a leading position in TV, OTT, and content creation. The FY23 financials show that ZEEL and Sony's combined revenue was almost Rs 15,000 crore.
After the merger, Sony would indirectly own 50.86% of the new company, while other ZEEL shareholders would hold a 45.15 percent stake and the ZEEL founders would hold 3.99%. The merged entity will get a fund infusion of $1.5 billion from Sony.
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