Sony called off a merger between its India unit and Zee Entertainment on Monday, ending a two-year consultation on the takeover that would have created a $10 billion powerhouse in the South Asian market.
Sony said in a statement that it had sent a termination letter to Zee after the Indian company failed to meet the terms, despite a 30-day extension. Sony said it was “extremely disappointed” that the Indian company failed to do its part of the deal. Prospects of the deal have resulted in a 60% rally in Zee shares in the second half of 2023. The Indian stock market is closed today due to a public holiday in the state of Maharashtra.
Sony Pictures Networks India, the wholly-owned Indian arm of the Japanese conglomerate, has been pushing for Zee CEO Punit Goenka to stay on — and lead — the merged entity after the deal, according to the people. who know the subject. Goenka has resisted for months and local media reported last week that he may agree to resign.
Sony has also been pushing Zee to improve its finances, which have only gotten worse in recent quarters. The two companies announced their intention to merge the entities in September 2021. The deal would have created a $10 billion powerhouse in India, where billionaire Mukesh Ambani has been increasing his wealth and reach in the media industry.
Ambani’s Reliance is in advanced stages of talks to acquire a 51% stake in Disney’s India business, which includes streaming service Hotstar.
“I decide to move forward positively and work towards strengthening Bharat’s pioneering M&E company, for all its shareholders,” Goenka said in a tweet on Monday, calling the news “a sign from the lord”.
The merger between Zee and Sony’s India operations was seen as crucial for both companies’ future prospects in the country. “The Disney+Reliance merger would create a strong market leader with over 40% viewership share and dominant streaming presence (Disney+Hotstar and JioCinema are the two largest OTT platforms in India by MAU share). Zee and Sony have viewership shares of c16% and c8-10% respectively, and in our view, a merged entity of Zee+Sony, with a viewership share of 25-30%, would be in a much better position to compete with Reliance + H Disney merged the entity,” UBS analysts said earlier this month.
Zee and Sony have been major players in the Indian television industry for the past 25 years. Sony launched Sony Entertainment Television in India in 1995 and has aired some of the most memorable shows like “Indian Idol” and “Kaun Banega Crorepati”, an official Hindi adaptation of “Who Wants to Be a Millionaire?”
The companies also operate on-demand streaming services such as Zee5 and SonyLiv that compete with dozens of other players including Netflix, Amazon Prime Video and Disney’s Hotstar and Ambani’s JioCinema.
