NEW DELHI: Sony Group’s decision to terminate its merger scheme with Zee Entertainment Enterprises (ZEEL) is heading towards a legal battle as the home-grown media & entertainment company has moved the National Company Law Tribunal (NCLT), Mumbai bench seeking directions to implement the merger scheme.
ZEEL has also initiated legal action to contest Culver Max and BEPL’s claims in the arbitration proceedings before the Singapore International Arbitration Centre (SIAC). Culver Max was formally known as Sony Pictures Networks India (SPNI) and Bangla Entertainment Pvt limited (BEPL) is its wholly owned subsidiary.
ZEE’s decision to approach SIAC comes as Sony is seeking $90 million in termination fees from Zee for breach of the Merger Cooperation Agreement (MCA). ZEEL said that Sony is not entitled to terminate the MCA and the claim for termination fee is legally untenable and has no basis whatsoever. It called upon Sony to withdraw the termination and immediately implement the Merger Scheme.
ZEEL’s call to complete the merger process came a day after its shares and market capitalisation lost one-third of their value on Tuesday. Analysts feel that Sony’s decision to cancel the $10 billion merger is a big blow to Zee which is struggling with falling revenue and loss of viewership.
The deal is said to have fallen after a long standoff between the two companies over whether Zee’s Chief Executive Officer (CEO) Punit Goenka would lead the merged entity. Sony is said to have concerns about Goenka since he is facing an investigation by India’s capital markets regulator SEBI. Zee claims that Goenka was willing to step down from his role for the sake of the merger.
Lalit Kumar, Partner at JSA Advocates & Solicitors, says the dispute between the two firms is headed for a messy legal battle in arbitration and other forum such as the NCLT.
“If closing conditions were met as asserted by Zee, then Sony Group could not have terminated the deal but from Sony’s perspective closing conditions were not met so it had a right to terminate the deal… Sony has sought compensation as a termination fee of $90 million for what it believes to be alleged breaches of merger agreement. Sony will have to prove the breaches of merger agreement and the quantum of loss claimed by it,” he said.
Cos Take legal route
ZEEL has initiated legal action to contest Culver Max and BEPL’s claims in arbitration proceedings before SIAC
ZEE approaches SIAC as Sony seeks $90 mn in termination fees from Zee for breach of Merger Agreement
ZEEL’s call to complete merger process cames after the company’s shares lost one-third of their value on Tuesday