Sony Group has sent a termination letter to Zee Entertainment Enterprises (Zee), informing the company of its decision to call off the proposed $10 billion media merger deal, bringing an end to a protracted two-year acquisition process, reported Bloomberg News.
The development comes after a crucial meeting was held on Friday, following which a final decision on the merger deal was expected.
The termination notice was reportedly sent by the Japanese entertainment giant to Zee earlier in the day and is anticipated to be officially disclosed to the exchange shortly, according to sources familiar with the matter who preferred to remain anonymous ahead of the public announcement.
Why did Sony call off merger deal?
The termination is attributed to Sony citing unmet conditions outlined in the merger agreement, as indicated in the termination letter reviewed by Bloomberg.
Sony's decision comes after an extended impasse between the two companies, primarily revolving around the leadership question for the merged entity.
The disagreement revolved around whether Punit Goenka, Zee's Chief Executive Officer, would assume the helm of the amalgamated company, especially given the ongoing regulatory investigation into his conduct by market regulator Securities and Exchange Board of India (SEBI).
This leadership standoff has effectively derailed the merger, which, if successful, would have given rise to a formidable $10 billion media conglomerate with the financial clout to compete against global streaming giants such as Netflix Inc. and Amazon.com Inc.
Termination letter after grace period expiry
None of the parties have issued any official statement on reports of the merger deal being called off yet.
Reports initially surfaced on January 8, indicating Sony's intention to abandon the merger due to the unresolved leadership dispute.
Despite subsequent statements from Zee suggesting ongoing negotiations to salvage the deal, the termination notice solidifies the conclusion of this high-stakes corporate drama.
The primary sticking point in the negotiation had been Zee's insistence on Punit Goenka leading the new entity, as per the terms agreed upon in the 2021 pact, while Sony expressed reservations given the regulatory scrutiny surrounding him.