Zee Entertainment Seeks $90 Million Termination Fee From Sony Over Failed Merger

Zee Entertainment (ZEEL) seeks $90 million termination fee from Sony after Sony pulled out of their $10 billion merger deal. Both companies are disputing the termination fee in arbitration.  ZEEL argues Sony breached the agreement and ZEEL fulfilled its obligations.

Zee Entertainment Enterprises (ZEEL) announced on May 23 that the company is seeking a termination fee of $90 million (approximately ₹750 crore) from Sony Pictures Networks India, now known as Culver Max Entertainment Pvt. Ltd., and its entity Bangla Entertainment Pvt. Ltd. (BEPL). This demand came after Sony pulled out of a $10-billion merger deal in January.

In a filing with the stock exchange, ZEEL stated, "Culver Max and BEPL have failed to comply with their obligations under the Merger Cooperation Agreement (MCA). Therefore, the Company has terminated the MCA and called upon Culver Max and BEPL to pay the termination fee, i.e., the aggregate amount equal to USD 90,000,000, in accordance with the MCA."

Sony Group Corporation had earlier accused ZEEL of failing to meet the merger conditions and initiated arbitration proceedings at the Singapore International Arbitration Centre (SIAC), seeking the $90 million termination fee. ZEEL, in response, has also taken legal action to challenge Sony's claims before the SIAC. Besides, ZEEL also filed a petition with the Mumbai bench of the National Company Law Tribunal (NCLT), requesting a directive for Sony to implement the merger scheme.

The SIAC denied Sony's request for interim relief to prevent ZEEL from moving to the NCLT to enforce the merger of Culver Max with ZEEL. Despite more than two years of negotiations and extending the closing period by a month, Sony announced the termination of the merger on January 22, citing ZEEL's failure to meet closing conditions. ZEEL, however, has maintained that it was willing to fulfill most of the conditions.

The NCLT's Mumbai bench had approved the merger scheme on August 10, 2023, which would have created a $10 billion media entity, combining over 70 TV channels, two video streaming services (ZEE5 and Sony LIV), and two film studios (Zee Studios and Sony Pictures Films India).

Recently, ZEEL reported a quarterly profit for the March quarter, reversing a loss from the previous year. The company posted a profit of ₹13.35 crore, compared to a loss of ₹196 crore a year earlier. Domestic advertising revenue grew by around 11% YoY, driven by a recovery in the macro advertising environment and increased spending by FMCG consumers. ZEEL's earnings before interest, taxes, depreciation, and amortization (EBITDA) margins also improved to 9.7% from 7.2% the previous year.