Zee shares plunge 14% as Sony plans to call off proposed merger

Shares of Zee Entertainment Enterprises Ltd. tumbled as much as 13.6% on Tuesday after Bloomberg News reported that Sony Group Corp. is planning to call off a merger with its India unit.

Zee Entertainment and SONY logos. (REUTERS)
Zee Entertainment and SONY logos. (REUTERS)

The stock slipped to 240.30 rupees, touching the lowest level since Feb. 23, during trading in Mumbai but has pared some losses since, data compiled by Bloomberg show. The benchmark S&P BSE Sensex was up.

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Sony is looking to cancel the merger plans amid a standoff over whether Zee’s Chief Executive Officer Punit Goenka would lead the merged entity. While the pact signed in 2021 said Goenka would lead the new $10 billion media giant, Sony no longer wants him as CEO amid a regulatory probe, according to people familiar with the discussions, who asked not to be named as the information is not public.

“Any potential risk of the merger getting called off by Sony will have a significant negative impact on valuations,” said Karan Taurani, analyst at Elara Securities India. “We don’t foresee Sony agreeing on Punit Goenka taking the chief executive role due to the ongoing investigation against him.”

A Zee spokesperson didn’t immediately respond to a request for comment.

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, Bloomberg News reported on Monday. 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 a person familiar with the discussions.

Sony and Zee entered into a merger agreement to create a media behemoth with the massive viewership and pricing power in the country of over 1.4 billion people. A collapsed deal will leave both more vulnerable at a time when billionaire Mukesh Ambani-led Reliance Industries Ltd. is negotiating a merger with Walt Disney Co.’s India unit.

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