How extension of the deadline will impact the Zee-Sony merger

The extension of the merger timeline between Zee Entertainment Enterprises (ZEEL) and Sony is a positive thing and the merger is expected to be completed by March/April 2024 in all likelihood without Punit Goenka as CEO of the merged entity, said Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital.

Zee Entertainment on Sunday said it has sought an extension in the December 21, 2023 deadline of its proposed merger with Culver Max Entertainment (CMEPL), formerly known as Sony Pictures Networks India.

ZEEL had approached Culver Max and Bangla Entertainment Pvt Ltd (BEPL) for an extension in the deadline to complete the proposed merger, which will create India's biggest media conglomerate, according to regulatory updates.

“Extension of the merger timeline between Zee and Sony is a positive thing in our view and in line with the expectation that the probability of the merger going though remains high,” Taurani said.

The extension in the merger timeline won’t have major regulatory hurdles, as the NCLT approval is not time-bound, and this is only a mutually agreed date between two parties subject to shareholder and Board approvals. Further appeals filed by Axis and other lenders in NCLAT too won’t negatively impact the merger, as NCLT approval is without any conditions, he added.

Taurani said, “We continue to believe that both parties could be undergoing negotiations over the CEO issue, wherein Sony may not want Punit Goenka as CEO of the merged entity until the outcome of the SEBI investigation is known. We continue to believe that there is a high likelihood of the merger going through without Goenka unless SEBI outcome is in his favour.”

Further, the outcome of the SEBI investigation could take 8-12 months, until which Sony may not wait and will propose to appoint a new CEO.

“As per our assessment, the negotiations between both parties could be resolved over the next 3-4 weeks, post which MIB (Ministry of Information and Broadcasting) and record date, delisting/relisting process may take another 6-8 weeks. We therefore believe that the merged company could get listed by March/April 2024,” Taurani added.

CMEPL is an indirect wholly-owned subsidiary of Sony Group Corporation (SGC). BEPL is also an indirect wholly-owned subsidiary of SGC and a part of the SGC Group.

The proposed USD 10-billion merger of ZEEL, BEPL and CMEPL has received regulatory approvals from the fair trade regulator CCI, bourses NSE and BSE, shareholders and creditors of the company.

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