Abhijit Joshi, managing partner of law firm Veritas Legal said a scheme, once approved by all the authorities, should typically proceed subject to the conditionalities as per the scheme.
“Typically, there is a lag between the approval from the court or tribunal and the effectiveness of the scheme. The scope of withdrawal will be limited and will depend on conditionalities to its effectiveness under the provisions of the scheme itself,” he explained.
As reported by ET, Sony has requested that Goenka let go of the position of MD and CEO of the merged entity till he gets cleared by Sebi, which is probing him for alleged misappropriation of company funds.
While Sony is also looking to appoint its own executive, SPNI MD & CEO NP Singh, as the CEO of the merged entity, Goenka believes that the Securities Appellate Tribunal’s (SAT) verdict setting aside the Sebi order banning him from holding the top executive position has cleared the way for him to become the MD and CEO of the Sony-Zee combined entity.
Three Likely Outcomes
While setting aside the Sebi order, the SAT allowed the market watchdog to complete its probe against Goenka and his father Subhash Chandra in eight months and take relevant action as per the legal process.Though he stated that Sony and Zee had gone too far with the merger to turn back now, lawyer Abhishek Malhotra listed three potential outcomes as the two parties worked out a solution to complete the merger.
He said the first scenario is that both parties decide that the cut-off date to complete the merger is approaching, so it’s important to go ahead with the merger with a CEO from Sony until Goenka gets cleared of charges by Sebi.
“While the Sebi probe is on, someone from Sony might become the CEO of the merged entity, and the CFO might be from Zee. They can take this arrangement forward and change it back to the original understanding as soon as Punit gets the clean chit,” Malhotra said.
In an interview with ET in June, ZEEL MD & CEO Punit Goenka stated that the merger’s current contractual end date is December 20, 2023. He also claimed that the merger would take place whether he was the CEO or not.
According to Malhotra, the second scenario could be that Punit will nominate someone else from Zee as the CEO of the merged entity.
“In the third scenario, Punit might say that there’s no impediment to him being the MD & CEO since there is a stay currently on the Sebi order. He might argue that the Sebi probe could last longer than eight months, so let him be the MD & CEO, and the probe can continue,” he stated.
Sudip Mahapatra, partner at S&R Associates, also believes that Sony and Zee will resolve their differences and implement the merger relatively soon since they will not want to miss out on the opportunity to build a large-scale business at a time when the media & entertainment industry is getting consolidated.
The Sony-Zee merger has received key legal and regulatory approvals to give effect to the merger.
The next step is getting the ministry of information and broadcasting’s (MIB) approval since there is a change in shareholding pattern and filing the NCLT order granting approval to the merger scheme of arrangement with the Registrar of Companies (RoC).
While stating that the SAT has set aside the Sebi order banning Goenka from holding directorship or a top management role, Mahapatra thinks there is a possibility that the matter will reach the Supreme Court since Sebi is mulling a challenge to the SAT verdict before the apex court. Goenka has reportedly filed a caveat before the Supreme Court in anticipation of Sebi’s move.
Mohapatra believes that if Goenka is appointed MD and CEO of the merged entity while the matter is still being litigated in the Supreme Court, it will add considerable uncertainty to the overall governance of the company.
“Sony has global stakeholders scrutinising its corporate actions. It may find it hard to justify such an appointment until the matter is fully resolved,” said Mahapatra.
“Given the circumstances, Sony seems to have made a reasonable proposal that its nominee become the CEO. Parties should proceed with this option until the litigation surrounding Goenka is fully resolved.”
Sony and Zee signed a merger agreement in December 2021. The deal was anticipated to conclude in 8-10 months. However, two years down the line, it is yet to be completed due to the cases filed by financial institutions against ZEEL and the Sebi order against the company’s promoters.
Once completed, the merger will lead to the creation of a multibillion-dollar media powerhouse with a leading position in TV, OTT, and content creation. The FY23 financials show that ZEEL and Sony’s combined revenue was almost Rs 15,000 crore.
After the merger, Sony would indirectly own 50.86% of the new company, while other ZEEL shareholders would hold a 45.15 percent stake and the ZEEL founders would hold 3.99%. The merged entity will get a fund infusion of $1.5 billion from Sony.
