Sony may have scrapped $10 billion merger of its Indian arm with Zee Entertainment owing to the latter’s failure in meeting some financial terms of the deal, it was reported. Zee was unable to come up with a plan to meet the financial terms as well, news agency Reuters reported quoting a termination notice. Zee has denied allegations in a letter to Sony, the report added, as the Indian company accused Sony of “bad faith” in calling off the merger.
Sony terminated merger plans on January 22 saying in a statement that the decision was taken because “closing conditions” were not satisfied after two years of negotiations. Reuters reported that Sony’s notice said Zee had “failed to take commercially reasonable” efforts to meet some financial thresholds, including with regards to cash availability. A “lack of commercial prudence” by the Indian network contributed to its decision, it said in the 62-page notice.
Sony also said several breaches of the merger agreement were “not remediable and any further attempts to mutually discuss would be an empty formality, especially given … plain denial (by Zee) and failure to provide a proposal to protect Sony’s interests. The breaches committed by Zee are not ‘procedural or technical’ in nature and will have a substantive impact on the transactions.”
Zee denied all the allegations saying privately, as per the report, that the Japanese company’s demand for a termination fee of $90 million was “legally untenable”.
The termination was “effected in bad faith” and “is wrongful, bad in law,” Zee wrote in its letter. Reuters reported last week that Sony was also concerned about Zee CEO Punit Goenka – who was set to head the merged entity – facing a regulatory investigation.
Zee was “unable to realistically assess the timeline required to resolve all the outstanding issues,” Sony’s termination notice stated as per the report.
