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Sony Board to Decide on $10-Billion Merger with Zee Entertainment Amid Leadership Dispute

Sony Group has convened a board meeting on January 19 to determine the fate of the proposed $10-billion merger with Zee Entertainment Enterprises. The decision, expected to be communicated to the Tokyo Stock Exchange next week, may indicate a potential discontinuation of the merger plan. The key point of contention revolves around the leadership of the merged entity, particularly the role of Punit Goenka, Zee’s current CEO and son of its founder Subhash Chandra.

Despite the 2021 agreement designating Goenka as the CEO of the merged company, Sony has shifted its stance and is reluctant to have him lead the entity. This change is exacerbated by an ongoing regulatory investigation, with the Securities and Exchange Board of India (SEBI) alleging deceptive practices by Zee, including false claims about loan recovery and misuse of positions by Chandra and Goenka.

The protracted stalemate over leadership has raised concerns within Sony about proceeding with the deal. Even after Goenka’s voluntary decision to relinquish the CEO position following the merger, uncertainties persist. Zee Entertainment’s request to extend the deadline for completing the deal, originally set for December 21, 2023, indicates unresolved issues, including the leadership role of Goenka, requiring additional time for negotiations.

Insiders at Sony suggest that even if Goenka agrees to step down, meticulous scrutiny of condition precedent pacts and financial adjustments must occur before finalizing the merger. Zee’s financial performance has seen a significant decline since the merger announcement, with net profit plummeting from Rs 956 crore in FY22 to Rs 48 crore in FY23.

The outcome of the board meeting carries significant implications for the future of the merger, as insiders indicate that for the deal to progress, Goenka may need to step down on the day the new merged company is established. The decision will shed light on whether Sony and Zee can overcome the leadership dispute and move forward with the high-profile merger.

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