“Although the transaction was previously expected to close by the end of the first half of the fiscal year ending March 31, 2024, based on the latest progress, it is currently expected to close in the months ahead,” Sony Group said in a statement. “Sony continues to assess the impact of the transaction on its consolidated financial results.”
Legal procedures may be the primary reason for the delay, experts said. The Tokyo-based conglomerate, which is Japan’s fourth-biggest company by market value, didn’t give specific reasons behind the delay in closing the transaction. Sony had earlier said it anticipated the merger to be concluded by September this year.
“By the end of the first half of this fiscal year, we are trying to complete the merger with ZEEL,” Sony Chairman and CEO Kenichiro Yoshida had said in May.
Sony Corp’s market capitalisation is $102 billion. Zee Entertainment, which has climbed nearly a fourth in the past six months in anticipation of the merger, has a market capitalisation in excess of Rs 25,410 crore (equivalent to about $3 billion). Zee’s stock price rose about 4% Friday to Rs 264.10 on the National Stock Exchange (NSE). Sony’s announcement came during the trading hours in Mumbai.
Pending Cases
Legal experts believe that the merger has been delayed due to the ongoing court cases at the National Company Law Appellate Tribunal (NCLAT) and the Securities Appellate Tribunal (SAT). “It seems that the pending challenge to the National Company Law Tribunal order by Axis Finance, alleging that the order is in violation of the market regulator’s ruling vis-a-vis Punit Goenka, may be the issue holding back the completion of the transaction,” said Abhishek Malhotra, Practice Managing Partner, TMT Law. Despite obtaining all requisite approvals for the merger, the appointment of Zee promoter family’s Punit Goenka as MD and CEO of the merged company remains uncertain due to a Securities and Exchange Board of India (Sebi) order that prevents him from heading the combined entity. Goenka has contested this order before SAT, which reserved its order in the matter earlier this week. Elara Capital SVP Karan Taurani said that the merger could be delayed by 4-6 weeks.
“The delay in the merger is primarily because of the conditional precedents that both parties are going through. They are trying to include the financials of MergeCo just beyond July and may be toward the September financials also before they give out a record date for the delisting,” he added.
$10-Billion Entity
The merger of Sony and Zee will create a $10-billion corporation with presence across media vehicles — TV, over-the-top (OTT), and content production. As per FY23 financials, the combined revenue of Zee and Sony was approximately ₹14,772 crore, or more than $1.5 billion. In an interview with ET in June, Goenka, who is the MD & CEO of Zee, said that the current contractual drop-off date for the merger is December 20, 2023.
“We can go until December 2023 without it impacting the deal as we have framed it. But if at all it needs to be discussed at some point in time, we will take it up,” he had said. The merger scheme involving Sony Pictures Networks, Zee, and Sony Pictures unit Bangla Entertainment was approved by the National Company Law Tribunal on August 10.
The merger has also received the green light from the Competition Commission of India (CCI) and the two primary stock exchanges in the country. Once the merger is completed, Sony will indirectly hold 50.86% of the combined company; the founders of Zee will hold 3.99%; and the other Zee shareholders will hold a 45.15% stake.
