Punit Goenka agreed to step down; will explore legal action: Zee on Sony's termination notice

Asserting that Punit Goenka, MD and CEO of ZEEL had agreed to step down in the interest of the merger with Sony, Zee Entertainment Enterprises (ZEEL) on Monday said that it would take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings.

Reportedly, the condition in the term sheet to appoint Goenka as the CEO of the merged entity had been a major problem for Sony and it was actively in search of its representative to lead the combined entity.

Culver Max Entertainment (CME), erstwhile Sony Pictures Networks India, today confirmed that it issued notice to ZEEL terminating the agreement dated December 22, 2021, to merge ZEEL and CME.

Following this, ZEEL in a statement said that in its board meeting held today, ZEEL took on record communications received from Culver Max Entertainment and Bangla Entertainment (BEPL) on January 22, 2024, purporting to terminate the Merger Co-operation Agreement dated December 21, 2021, (MCA), and seeking a termination fee of $ 90,000,000 on account of alleged breaches by ZEEL of the terms of MCA, invoking arbitration and seeking interim reliefs against ZEEL.

“ZEEL categorically denies all the assertions raised by Culver Max and BEPL on the alleged breaches under the terms of the MCA, including their claims for the termination fee,” the company said.

The Board of Directors noted that all efforts and steps were taken by ZEEL in line with the Merger Cooperation Agreement, approved by its shareholders and all regulatory authorities. ZEEL has consistently worked towards the implementation of the mentioned scheme in the interest of the shareholders. ZEEL also held several deliberations and good faith negotiations with Culver Max and BEPL, with a view to consider an extension of the merger completion timeline, that did not materialise.

“ZEEL’s Board of Directors is evaluating all the available options. Basis the guidance received from the Board, ZEEL will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings, the company said.

“ZEEL inked the Merger Co-operation Agreement with Culver Max and BEPL on 21st December 2021, in relation to the Composite Scheme of Arrangement, which was approved by the Mumbai bench of the National Company Law Tribunal (NCLT) on 10 and 11 August 2023, respectively,” it added.

Under the MCA, ZEEL exercised its right to require Culver Max and BEPL to enter into good faith negotiations for a period of 30 days to arrive at a mutual agreement on the extension of the end date by a reasonable period of time for completion of the transaction as per the terms of the MCA.

During this period, despite conducting numerous deliberations in good faith, the parties failed to arrive at a consensus on the purported pending conditions precedent that required action on the part of both ZEEL and Culver Max, BEPL under the terms of the MCA, ZEEL said.

“Punit Goenka, MD and CEO of ZEEL, was agreeable to step down in the interest of the merger and proposals in this regard were discussed, including for appointment of a director on the Board of the merged company, protections for conduct of pending investigations and legal proceedings in the best interest of ZEEL’s directors and shareholders and the consequent modifications to the scheme to incorporate the same. ZEEL proposed an extension of a maximum period of six months for consummation of the transaction, however, Culver Max did not provide any counter proposal for extension. These discussions did not result in any proposal from Sony but they rather have chosen to terminate,” the company said.

R. Gopalan, Chairman, ZEEL, said, “The Board of Directors has taken note of Sony’s letters purporting to terminate the Merger Co-operation Agreement, on the Company’s proposed merger with and into Culver Max Entertainment, invoking arbitration and seeking interim reliefs. We are evaluating the next steps and considering the appropriate course of action. The Board has noted that the Company took all the required steps in the course of its integration journey over the last two years, to ensure that the scheme is implemented at the earliest.”

“That said, the Board would like to assure its stakeholders that the Company will take all the necessary actions, in the best interest of all stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings. The Board has complete faith in the highly experienced senior management of the Company and will continue to guide the team. We recognize and value the trust our shareholders and stakeholders place in us, and we express gratitude for their continued support,” he added.

The company stated that ZEEL has displayed utmost commitment towards the merger by undertaking several permanent and irreversible steps, resulting in one time and recurring costs for ZEEL. Despite this, the Company will continue to evaluate organic and inorganic opportunities for growth, leveraging the intrinsic value of its assets.

ZEEL remains eternally grateful to its esteemed shareholders for their continued trust and belief in all its decisions. ZEEL also expresses immense gratitude to the legal and regulatory authorities for their support in enabling the proposed merger and aims to continue working towards the overall growth of the sector and Indian economy at large, the company said.

Notably, ZEEL on Friday said it is continuing to work towards a successful closure of its USD 10 billion merger with Sony, amid reports that the Japanese entity's board meeting to take a call on the fate of the protracted deal.

In September 2021, Sony Pictures Networks India and ZEEL entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations and programme libraries.

Subsequently, the two parties signed a definitive agreement for their merger in December 2022.

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