ZEEL spent ₹366 crore on now-failed Sony merger; asked to pay $90 million more

Two years after its initial announcement, the merger between Zee Entertainment Enterprises Ltd (ZEEL) and Sony was called off, after the former spent crores of rupees on compliances to secure the deal for the future of the company.

ZEEL spent ₹366.59 crore on compliances till September 2023 for its now-cancelled merger with Sony, out of which ₹176.20 crore was spent in the financial year ending in March 2023. The company further spent ₹190.39 crore in the first six months of the current fiscal, according to a regulatory filing by the Subhash Chandra family-promoted media entity.

After signing an agreement, ZEEL was racing to receive a series of regulatory clearances from SEBI, CCI, ROC, etc. It also got a go-ahead from the National Company Law Tribunal after receiving approvals from shareholders and creditors and closed all formalities for the merger.

This comes shortly after Sony Group Corp called off the massive merger with ZEEL, worth $10 billion, two years after the deal was announced. Sony further accused Zee of violating the terms of the merger pact and “invoking arbitration”.

Sony Group Corp has further demanded USD 90 million as break-up fees from ZEEL for violating the terms of the merger, which the latter said it will contest legally. According to experts, this would bring the stock of ZEEL under pressure in near terms.

This comes on the heels of the ongoing change in the industry dynamics of entertainment and streaming in India, as Walt Disney Co has signed a non-binding agreement last month with billionaire Mukesh Ambani-led Reliance Industries for a mega merger of their broadcasting businesses.

Prior to this, ZEEL and Sony’s merger would have been the most expensive entertainment deal in India, set to create the largest media entity in the country with over 100 channels and two of India’s top OTT platforms.

After the collapse of the ZEEL-Sony deal, RIL-Disney Star’s mega-merger has the potential to lead the Indian streaming markets, expected to have dominated the sports streaming space in the country, especially cricket.

“Sony which has around 7-8 per cent market share and ZEEL with around 16 per cent market share, the ideal situation would be a merger because the industry dynamics for the rest of the players are changing dramatically,” said Nuvama Institutional Equities Executive Director Abneesh Roy.

Over the last two years, ZEEL has reported a muted financial performance, with a revenue growth of just 2.2 percent. It is expected that ZEEL shares will take a tough hit on the stock market this week, as per analysts.

(With inputs from PTI)