Will find another opportunity in India post Zee merger collapse: Sony

Sony is looking for another opportunity to expand its business in India after the proposed merger of its Indian arm with Zee collapsed last month. Hiroki Totoki, president, COO & CFO of Sony said India is a very appealing market where it would continue to invest. On 22 January, Sony Pictures Entertainment formally terminated its merger agreement with Zee Entertainment after months of debate on the appointment of a chief executive for the merged entity.

Addressing the media at an earnings call on February 14, Hiroki Totoki, president, COO & CFO of Sony, said the company looking for possible opportunities to replace the merger plan. 

"India, on a long-term basis, has a great growth potential. It's a very appealing market. Therefore, we will try to seek various opportunities and if we can find another opportunity that would replace this type of plan," Totoki said when asked about the company's strategy in India after the termination of the proposed merger.

On the investment which Sony had committed as part of the deal, he said:"Well, that investment is not going to change a capital allocation or it will not change our behaviour in our investment. So at the moment, we do not have any concrete plans."

In September 2021, Zee Entertainment Enterprises (ZEEL) told its board of directors that it has approved a merger with Sony Pictures Networks India (SPNI). After the 90-day due diligence period, the merger deal was signed by the two companies in December 2021. As per the proposed merger conditions between Sony and ZEEL, the Japanese company was also obligated to invest $1.5 billion in the newly merged entity.

Under the terms of the original deal, signed two years ago, Punit Goenka, the managing director and CEO of Zee, was to head the merged entity. Cut to 2023, things changed after the Securities and Exchange Board of India (Sebi) accused Shubhas Chandra and his son Goenka of diverting at least Rs 200 crore from Zee via certain promoter-group firms. 

The Japanese media giant, on the other hand, wanted its India head NP Singh to be CEO of the merged entity. Goenka was against this, but said he wanted the merger to go through.

Following failed talks between the two entities, Sony notified ZEEL of its decision to call off the merger. 

Sony Group Corporation (SGC) had said ZEEL did not satisfy the merger conditions and initiated arbitration proceedings before SIAC claiming $90 million (around Rs 748.5 crore) as a termination fee. 

Sony, in a notice issued to Zee Ltd, said that despite engaging in good-faith discussions to extend the merger cooperation agreement's end date, an agreement could not be reached by the January 21 deadline. After more than two years of negotiations, Sony expressed deep disappointment that the closing conditions for the merger were not met by the specified end date.

On the other hand, Zee Entertainment refuted all claims made by Sony, asserting that it has not breached the terms of the merger agreement. The company is actively evaluating available options to address the situation.

ZEEL filed a petition before the National Company Law Tribunal (NCLT), seeking a direction to Sony Group to implement the merger scheme.

On February 4, the Singapore International Arbitration Center (SIAC) rejected Sony Group's request to prevent ZEEL from approaching NCLT to enforce the unsuccessful merger. The Mumbai bench of NCLT has already served Sony with a notice regarding a petition filed in relation to this matter.

If the merger is finalised, the merged entity would possess more than 70 TV channels, two video streaming platforms, ZEE5 and Sony LIV, as well as two film studios, Zee Studios and Sony Pictures Films India. That would have established the biggest entertainment network in the country.

Sony Pictures Network India (SPNI), which is an indirect wholly-owned subsidiary of Sony Group Corporation, Japan, owns 26 channels that operate in Hindi and several other languages having a viewership of over 700 million. Besides, it has one OTT platform Sony LIV on which it streams live sports, movies, short films and its original and archival content. It has around 33 million viewers.

(With PTI inputs)