Sony Pictures Networks India, which is now known as Culver Max Entertainment Pvt. Ltd., and its entity Bangla Entertainment Pvt. Ltd. (BEPL) on Monday called off their $10 billion merger deal with Zee Entertainment Enterprises Ltd. (ZEEL) blaming ZEEL for not meeting closing conditions within the deadline. The Japanese company has also initiated arbitration proceedings against ZEEL and has sought a fee of $90 million from ZEEL for termination of the deal.
ZEEL on its part has denied the allegations and said it would take legal steps to protect its interests.
The companies had entered into an agreement for the merger dated December 22, 2021.
In a statement issued on Monday, Sony said, “Although we engaged in good faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end dates.”
“We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences,” the company added.
The ZEE Entertainment Enterprises Ltd. (ZEEL) board which met in Mumbai on Monday took on record communications received.
“ZEEL categorically denies all the assertions raised by Culver Max and BEPL on the alleged breaches under the terms of the MCA, including their claims for the termination fee,” the company said in a filing with stock exchanges.
“The Board of Directors noted that all efforts and steps were taken by ZEEL in line with the Merger Co-operation Agreement, approved by its shareholders and all regulatory authorities. ZEEL has consistently worked towards the implementation of the mentioned scheme in the interest of the shareholders,” the company said.
“ZEEL also held several deliberations and good faith negotiations with Culver Max and BEPL, with a view to consider an extension of the merger completion timeline, that did not materialise,” it said.
ZEEL said its Board of Directors is evaluating all the available options. “Basis the guidance received from the Board, ZEEL will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings,” the company said.
ZEEL said it inked the Merger Co-operation Agreement with Culver Max and BEPL on 21st December 2021, in relation to the Composite Scheme of Arrangement, which was approved by the Mumbai bench of the National Company Law Tribunal (NCLT) on 10 and 11 August 2023, respectively.
“Under the MCA, ZEEL exercised its right to require Culver Max and BEPL to enter into good faith negotiations for a period of 30 days to arrive at a mutual agreement on the extension of the end date by a reasonable period of time for completion of the transaction as per the terms of the MCA,” the company said.
During this period, despite conducting numerous deliberations in good faith, the parties failed to arrive at a consensus on the purported pending conditions precedent that required action on the part of both ZEEL and Culver Max, BEPL under the terms of the MCA, it added.
ZEEL said Punit Goenka, MD & CEO, had agreed to step down in the interest of the merger and proposals in this regard were discussed, including for appointment of a director on the Board of the merged company, protections for conduct of pending investigations and legal proceeedings in the best interest of ZEEL’s directors and shareholders and the consequent modifications to the scheme to incorporate the same.
“ZEEL proposed an extension of a maximum period of six months for consummation of the transaction, however, Culver Max did not provide any counter proposal for extension. These discussions did not result in any proposal from Sony but they rather have chosen to terminate,” the company said.
R. Gopalan, Chairman, ZEE Entertainment Enterprises Ltd. said, “The Board of Directors has taken note of Sony’s letters purporting to terminate the Merger Co-operation Agreement, on the Company’s proposed merger with and into Culver Max Entertainment Pvt. Ltd, invoking arbitration and seeking interim reliefs.
“We are evaluating the next steps and considering the appropriate course of action. The Board has noted that the Company took all the required steps in the course of its integration journey over the last two years, to ensure that the scheme is implemented at the earliest,” he said.
“That said, the Board would like to assure its stakeholders that the Company will take all the necessary actions, in the best interest of all stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings,” he said.
“The Board has complete faith in the highly experienced senior management of the Company and will continue to guide the team. We recognize and value the trust our shareholders and stakeholders place in us, and we express gratitude for their continued support,” he added.
ZEEL said it had displayed utmost commitment towards the merger by undertaking several permanent and irreversible steps, resulting in one time and recurring costs for ZEEL.
“Despite this, the Company will continue to evaluate organic and inorganic opportunities for growth, leveraging the intrinsic value of its assets. ZEEL remains eternally grateful to its esteemed shareholders for their continued trust and belief in all its decisions,” the company said.
Later during the day Mr. Goenka posted pictures with family on X from Ayodhya saying, “As I arrived at Ayodhya early this morning for the auspicious occasion of Pran Pratishtha, I received a message that the deal that I have spent 2 years envisioning and working towards had fallen through, despite my best and most honest efforts.”
“I believe this to be a sign from the Lord. I resolve to move ahead positively and work towards strengthening Bharat’s pioneering M&E Company, for all its stakeholders.”
