What lies ahead of the Sony-Zee merger?

The due diligence process for the merger of Zee Entertainment with Sony Pictures Networks India will have to be concluded by both parties within 90 days, after which the merger will go ahead, subject to regulatory approval from authorities concerned, including from the Competition Commission of India.

The mega merger that will create the largest broadcasting network in the country, with revenues in the range of Rs 16,000 crore annually, may not be a smooth sailing though given the questions raised about the corporate governance practices at Zee.

Invesco, one of the largest shareholders in Zee, had earlier sought the removal of Punit Goenka as MD and CEO. However, according to the term sheet, Goenka's appointment as MD and CEO of the company for the next five years is an integral part of the deal.

Zee Entertainment has not yet reached out to other shareholders such as Invesco and LIC on the proposed transaction with Sony.

According to industry experts, the deal may take some time to get through. "No deal is signed like that in a blanket and it depends on the corporate governance guidelines. The deal is loose right now; they have just signed the term sheet," a broadcasting industry expert said.

"They have signed the term sheet. No one knows what will turn out in due diligence. If Sony discovers serious corporate governance issues, either the deal will be called off or they will negotiate. Punit’s motivation here is power. I’m 99% sure the deal will go through. Sony will say we will have control, but you run the company," the expert said.

Some questioned the reason and logic for Goenka's appointment as MD and CEO in the light of allegations made by Invesco.

“The main thing is that they are not Punit Goenka’s shares, they are the financial institution’s shares. The final deal will be signed at the AGM," said another broadcasting industry executive.

"Conditions for my appointment are the same as what has already been approved by the shareholders. There is no change to that. Any change in the remuneration would be subject to board approval," Punit Goenka said on Wednesday.

Goenka also said merger approvals will be sought from all relevant bodies after the mutual due diligence.

"We have entered into an exclusivity with the other party for 90 days wherein we will be conducting due diligence. Post that, we will be taking the scheme to NCLT (National Company Law Tribunal) and SEBI (Securities and Exchange Board of India) and shareholder approval is required," he said.

Talking about the proposed merger and its impact, Goenka said on Wednesday, "Zee and Sony India will together form the largest media and entertainment player in India and become a market leader across genres and languages with a scale of close to $2 billion in revenue."

"Sports will become an area of focus for the merged company," he said.

Would this mean higher bidding for sports properties, including IPL, which will be up for grabs soon?

A senior industry observer said the television rights for IPL will hardly get any major hike. “A lot will depend on the digital play as there will be global players such as Facebook and Google bidding for that. Jio will also be in the fray. Even networks bidding for both TV and digital rights know the reality and have learned the lessons from Star India,” he said.

Goenka said the primary objective will be the overall growth of the company.

"The focus will be on maximising reach and viewership. Overlaps are there in the Hindi-speaking markets of GEC and movies. But the content that exists on the platforms is unique and exclusive," said Goenka.

Asked how will the consolidation impact the TV industry, an industry observer said the ad rates may be hiked eventually and other broadcasters may follow suit.

Role of NP Singh

Under NP Singh's leadership, Sony has managed a fair amount of success in India. The relevance of his role in the merged entity is not too clear as of now.

Singh is likely to hold a leadership role in the board of the merged entity. However, it is still not clear how powerful this position will be as Goenka will run the show from an operational point of view.

"NP Singh will take a leadership role in the merged entity. Some people say the role of the chairman is very powerful in American companies, but in the Indian context, the chairman's role is dormant or mostly around corporate governance," said an industry expert.

Another broadcasting industry executive said that though NP Singh is about to retire soon, he will be Sony's eyes and ears on the ground.

"Sony trusts him. Sony will invest money and wants returns. They will set a target that Goenka will take care of,” the executive said.

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