With the upcoming Sony board meeting, the unending Zee-Sony saga may be entering a critical phase, possibly even its last episode finally.
In 2021, the Zee-Sony merger was introduced as the best mega media-deal to establish a sizeable broadcast entity in India. Its genesis lay in providing support to the promoters of Zee Entertainment Enterprises, then entangled in a protracted dispute with Invesco, a US investor seeking to address alleged mismanagement issues within the company.
Zee commands a substantial 18% market share in the Indian entertainment and broadcasting sector, surpassing Sony’s 6%. However, the merger has encountered impediments, primarily attributable to Zee’s inability to fulfil various stipulations, confronting regulatory and market hurdles.
The deal has faced a series of setbacks, especially with a regulatory investigation delving into allegations of the Goenkas participating in a “fraudulent and unfair” scheme, diverting about ₹200 crore ($24 million) from Zee.
Compounding these challenges, Zee’s business has experienced a downturn in recent months, partly attributed to escalated streaming costs. In December, acknowledging its inability to meet the deal closure deadline, the company’s admission led Sony officials to express their readiness to abandon the agreement.
A one-year ban imposed by the Securities and Exchange Board on Punit Goenka and his father, Subhash Chandra, was later overturned by the Securities Appellate Tribunal. Ahead of the January 20 deal closure deadline, Sony insists on the removal of Goenka for the deal to progress. Nevertheless, Goenka, Zee’s current head, remains resistant to relinquishing his position.
Sony Pictures Entertainment, confronted with challenges stemming from Zee’s financial health and unmet conditions, has reportedly extended an offer to Punit Goenka for an advisory role in the new entity, emphasizing his exclusion from the board during ongoing regulatory investigations.
As Sony Group Corp. convenes a board meeting to decide on the $10-billion merger on Friday, the Zee faction contends that Goenka’s appointment as managing director and chief executive officer is integral, and part of the original agreement. Sony, however, will remain cautious of any potential hostile takeover.
If the Zee-Sony merger goes through, it would create a robust 74-channel entity, signifying a pivotal move in India’s evolving media landscape.
One would remember that Disney India and Viacom of Reliance Industries are looking at a potential merger, and have signed a non-binding term sheet. A potential merger between Disney and Reliance in India could establish a robust market leader, commanding over 40% TV viewership share, coupled with a substantial presence in the streaming domain.
On the other hand, the amalgamated Zee-Sony entity would possess a viewership share of about 30%, positioning itself as a formidable competitor in the market.
Zee faces insolvency proceedings initiated by creditors, adding an additional layer of complexity to the situation. But then, there is more to lose for the Goenkas if Sony backs out. They have to contend with a liquidation challenge and find another suitor, assuming they don’t get liquidated or sold to any distress buyer.
Chandra and Goenka have diligently pursued the monetization of their longstanding efforts in having built Zee. They want to maintain an executive role for and might negotiate for a larger drop-off fee to step down from the executive role. One might see it play into the most expensive garden-leave that the Indian market has seen.
Sony, on the other hand, wants this deal that they have patiently waited for so many months. The Japanese are known for their tenacity and long patience in dealing with making. This deal would make them a significant player in India. Sony needs an Indian partner, as the Indian market has proved consistently hard to crack.
The imminent resolution hinges on which party will blink first, as the unfolding drama tests the renowned Japanese patience. But Goenka is testing fate, in the form of the famous Japanese patience.
