Sony ‘predetermined’ to terminate merger deal: ZEE tells NCLT

“The company was also willing to discuss any other alternate closing timeline that Sony believed would be reasonable and achievable. However, the truth, as revealed now, is that Sony was pre-determined to terminate the merger agreement. Not only did it reject ZEE’s proposal, it also did not provide any counter proposal for extension and instead started making several false and baseless allegations of breaches and non-compliance upon ZEE”, Zee claimed in its petition, a copy of which has been seen by Mint. 

The dispute arises following Sony Pictures’ (Culver Max) decision to call off the supposed $10 bn merger between itself and Zee. In its termination letter sent on 22 January, Sony alleged that it had to terminate the merger due to non-fulfilment of the Conditions Precedent (CPs). The two parties received the NCLT’s approval on 10 August last year for the proposed merger. 

The termination letter was sent at the stroke of midnight and minutes later another notice of arbitration proceeding before the Singapore International Arbitration Centre was also sent. In its arbitration application before the SIAC, Sony demanded a $90 million termination fee from the Indian entertainment giant for alleged breaches of the merger agreement by Zee.

The matter is pending before the SIAC. 

Aggrieved by the letter, Zee immediately decided to take a legal recourse following which it informed the exchanges that it would approach the NCLT and SIAC to seek relief.

“The reality is that all along Sony was well aware and updated at each step about the compliance status of every obligation. In fact, Sony sought approval from NCLT and affirmed its commitment of completing the merger despite being aware of the purported non-compliances,” Zee said. 

The petition also stated that, under the merger agreement, both the companies were required to make an application to the ministry of information and broadcasting (MIB) for obtaining approvals for the transfer of the licences obtained by ZEE in relation to the up-linking and down-linking of television channels to the merged entity. 

“The application with MIB has still not been filed which is solely attributable to Sony’s omission and failure,” ZEE added.

Procedurally, as a part of the other conditions, Sony was also required to obtain the ministry of information and broadcasting approval and security clearance from the ministry of home affairs for Punit Goenka’s appointment as the managing director and chief executive officer of the merged company. However, Sony did not comply with this. 

On 15 October, Mint reported that Sony had initiated discussions with Walt Disney Co. about a potential acquisition of its India business, as part of Sony’s contingency plan in the event that the merger between ZEE and Sony falls through or is otherwise delayed.

Zee immediately asked Sony to publicly deny the report through an email exchange. Mint has reviewed a copy of the email.  

“We have of course adhered to the principles outlined in the merger cooperation agreement (MCA), and would not take any steps that would jeopardize the merger process,” Sony said in its response to the email. It, however, did not clarify or deny the development on its acquisition with Walt Disney. 

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Published: 02 Feb 2024, 05:34 PM IST