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Zee Entertainment Makes Final Push to Revive $10 Billion Merger with Sony

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Zee Entertainment Enterprises Limited (ZEEL) is reportedly making a final attempt to revive its $10 billion merger deal with Sony Pictures Entertainment Inc. (SPE), according to several media reports. The deal, initially announced in May 2022, was scrapped in January 2024 due to regulatory hurdles and internal disagreements within ZEEL.

The Economic Times, citing sources aware of the matter, reports that ZEEL has reached out to SPE to reopen discussions and address the previous concerns. This renewed effort comes after Invesco Oppenheimer, the largest shareholder in ZEEL with a 17.88% stake, expressed its disapproval of the previous deal’s termination and urged the company to explore all options for value creation.

Key sticking points in the Zee Sony deal:

  • Background: The Zee-Sony merger had been in the works for two years before hitting a roadblock. Unfortunately, certain unresolved “closing conditions” and leadership disputes, including disagreements over CEO Punit Goenka’s involvement in regulatory matters, led to the deal’s termination by Sony.
  • Regulatory approvals: The merger required clearances from multiple Indian regulatory bodies, including the Ministry of Information and Broadcasting and the Competition Commission of India. Obtaining these approvals within the stipulated timeframe proved challenging.
  • Corporate governance concerns: Some ZEEL shareholders, including Invesco Oppenheimer, raised concerns about the deal’s structure and the valuation offered by SPE.
  • Recent Developments: Representatives from both Zee and Sony have been diligently working to salvage the merger. Over the past two weeks, efforts to revive the deal have gained momentum. However, significant differences remain unresolved, and both sides are standing firm on their positions.

What’s different this time?

It’s unclear what specific changes ZEEL might propose to address the previous concerns. However, reports suggest the company could offer SPE a larger stake in the merged entity or propose a different deal structure. Additionally, the Indian government has implemented some regulatory reforms aimed at streamlining media M&A deals, which could potentially ease the approval process.

Market reaction on Zee shares:

Shares of Zee rose by 5.2% in early trading on Tuesday following news of the revival attempt. Investors seem cautiously optimistic about the possibility of a successful deal, which could create a major media powerhouse in India.

Analysts’ views:

Industry analysts believe that a revived merger could benefit both companies. For ZEEL, it would provide access to Sony’s global content library and distribution network. For SPE, it would offer a strong foothold in the rapidly growing Indian media market. However, analysts also caution that regulatory hurdles and internal conflicts within ZEEL could still derail the deal.

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