Zee Entertainment shares fall 5% on reports of Sony merger deal collapse

Shares of Zee Entertainment Enterprises fell 5.1 per cent on Friday following media reports that the company’s merger transaction with Sony India is set to collapse over the weekend.

Zee's shares closed at Rs 235.5 a share on Friday with a market valuation of Rs 22,620 crore. The market valuation of Zee has dropped by 30 per cent, or Rs 9,759 crore, since the deal was first announced on 9 September 2021.

On 11 January this year, Sony Group of Japan had said it is continuing talks until 20 January on the deal to merge its Indian subsidiary with Zee Entertainment Enterprises that would create a $10 billion entity. “There are some last minute negotiations taking place between all the parties and we have to wait and watch until a formal announcement is made,” said a banker close to the deal.

As per the merger transaction announced in December 2021, Puneet Goenka, currently the Managing Director and Chief Executive Officer of Zee, was to be the head of the merged entity. The merged entity would have almost a 25 per cent share in the Indian general entertainment channels (GEC). The Securities and Exchange Board of India (Sebi) had earlier asked Goenka to step down as Zee Managing Director citing a regulatory lapse. But the Securities and Appellate Tribunal (SAT) had set aside the Sebi order on 30 October last year. After the Sebi order, Sony had reportedly changed its stance asking Goenka not to lead the merged entity.

Both Sony Group Corporation at Tokyo and Zee did not comment on Friday.

Earlier on 19 December, Sony Pictures India had said a Zee’s notice to the Bombay Stock Exchange and the National Stock Exchange of India dated 17 December is an acknowledgement that they will not be able to meet the 21 December 2023 deadline to close the SPNI/ZEE merger. “The notice triggers an existing contractual provision in the deal that allows for both parties to discuss the possibility of extending the deadline. SPNI is required to start those conversations but has not yet agreed to a deadline extension. We look forward to hearing ZEE’s proposals and how they plan to complete the remaining critical closing conditions,” it said.

In a late evening statement to the stock exchanges, Zee said it is negotiating with Sony extension of the deadline for completing the merger deal “by a reasonable period of time. 
 

Zee said it is committed to the merger with Sony and continuing to work towards a successful closure of the transaction and is engaging in good faith negotiations with Sony.