Zee Entertainment Enterprises Ltd said on Monday it is considering legal action against Sony Group after the Japanese media company terminated the $10-billion merger deal.
Sony ended the merger, which was announced two years ago, as they could not agree on some deal conditions, and has also sought $90 million in termination fees from Zee.
“Culver Max Entertainment (CME) today issued notice to Zee Entertainment Enterprises Ltd. (ZEEL) terminating the agreement dated December 22, 2021, to merge ZEEL and CME. Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date.
“We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences," Sony said in a statement earlier on Monday.
Zee shares closed 1.5% lower in a Saturday trading session in Mumbai. The market is closed on Monday for a public holiday in Maharashtra.
"ZEEL’s Board of Directors is evaluating all the available options. Basis the guidance received from the Board, ZEEL will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings," said Zee in a stock exchange filing.
Gopalan, Chairman, ZEE Entertainment Enterprises Ltd. said: “The Board of Directors has taken note of Sony’s letters purporting to terminate the Merger Co-operation Agreement, on the Company’s proposed merger with and into Culver Max Entertainment Pvt. Ltd, invoking arbitration andseeking interim reliefs. We are evaluating the next steps and considering the appropriate course ofaction. The Board has noted that the Company took all the required steps in the course of its integration journey over the last two years, to ensure that the scheme is implemented at the earliest. That said, the Board would like to assure its stakeholders that the Company will take all the necessary actions, in the best interest of all stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings. The Board has complete faith in the highly experienced senior management of the Company and will continue to guide the team. We recognise and value the trust our shareholders and stakeholders place in us, and we express gratitude for their continued support.”
Zee said its MD Punit Goenka was "agreeable to step down in the interest of the merger" and yet Sony decided to terminate the deal.
"Despite conducting numerous deliberations in good faith, the parties failed to arrive at a consensus on the purported pending conditions precedent that required action on the part of both ZEEL and Culver Max, BEPL under the terms of the MCA. Punit Goenka, MD & CEO of ZEEL, was agreeable to step down in the interest of the merger and proposals in this regard were discussed, including for appointment of a director on the Board of the merged company, protections for conduct of pending investigations and legal proceeedings in the best interest of ZEEL’s directors and shareholders and the consequent modifications to the scheme to incorporate the same. ZEEL proposed an extension of a maximum period of six months for consummation of the transaction, however, Culver Max did not provide any counter proposal for extension. These discussions did not result in any proposal from Sony but they rather have chosen to terminate," said Zee.