(Bloomberg) -- Sony Group Corp. is planning to call off the merger pact of its India unit with Zee Entertainment Enterprises Ltd., said people familiar with the matter, capping two years of drama and delay in creating a $10 billion media giant.
The Japanese conglomerate is looking to cancel the deal due to a standoff over whether Zee's Chief Executive Officer Punit Goenka, also its founder's son, would lead the merged entity, the people said, asking not to be named as the information is not public. While the agreement signed in 2021 was that Goenka would lead the new company, Sony no longer wants him as CEO amid a regulatory probe, the people said.
Sony plans to file the termination notice before a Jan. 20 extended deadline for closing the deal, saying some of the conditions necessary for the merger had not been met, one of the people said. Goenka has stood his ground in wanting to helm the merged entity, as agreed initially, over prolonged meetings in the past few weeks, according to another person.
Discussions are still ongoing between the two sides and a resolution can still emerge before the deadline.
Representatives for Sony and Zee did not immediately respond to an email and phone calls seeking comment.
Last-Mile Tussle
The scuttling of the deal due to the last-lap leadership tussle will not only leave Zee vulnerable to possible defaults, it's coming at a time when billionaire Mukesh Ambani is seeking to bolster Reliance Industries Ltd.'s media ambitions by negotiating a merger with Walt Disney Co.'s India unit.
The Sony-Zee combine aimed to create a $10 billion media behemoth with the financial muscle to take on global powerhouses Netflix Inc. and Amazon.com Inc. as well as local heavyweights like Reliance.
Mumbai-based Zee had earlier requested for an extension of a Dec. 21 deadline by a month. Sony said then that it wanted to hear Zee's proposals on completing the “remaining critical closing conditions.”
The Securities and Exchange Board of India alleged in June that Zee faked the recovery of loans to cover private financing deals by its founder, Subhash Chandra. Chandra and his son, Goenka, “abused their position” and siphoned off funds, SEBI said in an interim order, barring Goenka from executive or director appointments in listed companies.
While Goenka got a reprieve from an appellate authority against the Sebi order, Sony views the ongoing probe as a corporate governance issue, Bloomberg reported earlier.
Sony Pictures Networks India Pvt. would have owned a 50.86% stake in the merged media firm and Goenka's family was to own 3.99% in the proposed transaction, according to the 2021 agreement. The proposed merger has received almost all regulatory approvals and would have helped expand Sony's media business in the world's most-populous country.
--With assistance from Manuel Baigorri.
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