The proposed Zee-Sony merger, once expected to create a huge media company worth $10 billion, appears determined to remain a saga of twists and turns. After collapsing in January 2024, the possibility of its revival emerged, accompanied by new discrepancies unearthed by the Securities and Exchange Board of India (SEBI).
Is it actually possible to revive a terminated merger?
“A merger between two companies begins with an agreement between the merging parties. Therefore, termination of the said agreement would depend upon its own set of terms and conditions. However, under the Companies Act, 2013, the merger is concluded, pursuant to the NCLT’s (National Compact Law Tribunal) final approval/sanction. In such cases, any change/modification in the merger conditions would require approval of the NCLT,” said Shashank Agarwal, Advocate, Delhi High Court.
While reports of a revived Zee-Sony merger surfaced on Tuesday morning, reportedly leading to the company’s stock rallying in the markets, Zee Entertainment issued a clarification later in the evening that the firm was not involved in any negotiations with relation to the collapsed Sony merger deal.
If reviving the merger or making changes significantly alters what stakeholders originally agreed to, the NCLT might send the decision back to them (shareholders and creditors) for their final say.
Crucial NCLT hearing on March 12: Will SEBI revelations impact on hearing?
Talking of stakeholders, they are anticipating a critical NCLT hearing on March 12 regarding Zee Entertainment’s plea to enforce the stalled $10-billion merger with Sony Pictures Networks. The outcome of the March 12 hearing will provide clarity on whether the merger stands a chance to be reconsidered.
Read More: NCLT hearing on March 12 to determine fate of $10-bn Zee-Sony merger
As reported by Bloomberg, Securities and Exchange Board of India (SEBI), has discovered a significant discrepancy of over $240 million in the accounts of Zee Entertainment Enterprises Ltd.
The regulatory body’s investigation into Zee founders, primarily focusing on Subhash Chandra and Puneet Goenka, reportedly uncovered the potential diversion of approximately Rs 20 billion ($241 million) from the company. This figure is roughly ten times larger than SEBI’s initial estimates, raising concerns about financial irregularities within Zee. However, this is not the final figure, according to Bloomberg sources. The amount could change depending on Zee’s response to SEBI’s inquiries.
Read More: Zee Entertainment faces fresh woes as SEBI uncovers $240 million discrepancy
“After the fall out, Zee knocked on the NCLT doors for implementation of their agreement for merger. During the SEBI investigation, SEBI has uncovered more than $240 million discrepancies and more to go. It will have an impact on the order as this investigation will become part and parcel of the proceeding and would show how Zee has knocked on the doors of NCLT with unclean hands. It is not just discrepancies but also suppression of facts for personal gain,” said Alay Razvi, Partner at Accord Juris LLP, Hyderabad.
What Lies Ahead?
With fresh discrepancies coming to light, the path forward remains unclear.
Archana Balasubramanian, partner at Agama Law Associates addresses the complexities of the matter.
“Mergers are like marriages – a lot of work happens prior to the merger especially with respect to planning for future or the post merger situation,” she said.
“In this situation where steps were taken by each party towards closure of the merger, the biggest worry is exchange of confidential information, blurring of boundaries with respect to IP of products / services,” she added.
Key aspects of termination are costs of unwinding, return of information exchanged, revocation of access and managing clients and vendors.
“Contractual arrangements set in the expectation of the merger going through would fail for sure and need innovative solutions to be revived. Not to mention the exodus of disgruntled employees,” Balasubramanian said.
Read More: Zee starts appraisals on time, but hiring tightens as cost cuts loom: Job security in question?
Will the merger revive yet again? What will SEBI’s findings bring? Only time will tell how the story unfolds, but one thing’s for sure, the Zee-Sony merger saga is far from over, and its impact on the Indian media landscape will continue to reverberate.