The proposed merger between Sony's India operations with Zee Entertainment Enterprises Ltd (ZEEL) collapsed in acrimony as the Japanese parent pulled the plug on a deal that's been two years in the making. They had aimed to create one of the country's biggest media and entertainment businesses amid a move toward consolidation in the industry.

"Sony Pictures Networks India Private Ltd (SPNI) (now known as Culver Max Entertainment Ltd), a wholly owned subsidiary of Sony Group Corp (Sony), today issued a notice terminating the definitive agreements entered into by SPNI and Zee Entertainment Enterprises Ltd," the Japanese company said in a press release issued on Monday.

It also sought a $90 million termination fee, while invoking arbitration and legal actions against the Indian company "on account of alleged breaches by ZEEL," potentially leading to a prolonged legal dispute.

The Punit Goenka-led company said it will contest Sony's claims.

"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 (Sony's) claims in the arbitration proceedings," the company said in a stock exchange filing.

The merger cooperation agreement (MCA) had been signed on December 21, 2021, and was valid for two years, extendable by a month for "good-faith" negotiations. That deadline expired with Sony unwilling to accede to Zee's demand for another six months to resolve the matter.

"Although we engaged in good-faith discussions to extend the end date under the merger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline," the company said in a statement.

The deal is said to have failed over ZEEL MD and CEO Goenka's candidature for the top job at the merged company, given that he's facing investigation by the Securities and Exchange Board of India (SEBI). As ET first reported on November 4 last year, the Japanese side had proposed that NP Singh, an old Sony hand, be picked for the role instead.

In a last-ditch effort, Goenka had even called up senior Sony Pictures Entertainment executive Ravi Ahuja to try and sort out matters, said people aware of the matter.

Goenka, who was in Ayodhya on Monday to attend the consecration of the Ram mandir, posted on X: "The deal that I have spent two years envisioning and working towards has fallen through, despite my best and most honest efforts. I believe this to be a sign from the Lord. I resolve to move ahead positively and work towards strengthening Bharat's pioneering M&E company for all its stakeholders."

The deal was originally planned to conclude at the end of FY22. However, delays in Competition Commission of India (CCI) approval, coupled with legal and regulatory challenges faced by the ZEEL promoters, ensured that the transaction kept getting delayed.

The development is a setback for both companies. Along with other traditional broadcasters, they are staring at shrinking linear TV profitability and widening losses from the streaming business.

Media veteran Kunal Dasgupta, who had earlier served as CEO of Sony's India media entity, said it will have to remain content with a smaller, albeit, profitable business.

"Sony might look to acquire digital assets, while Zee will have to find another white knight," he said. "The market has become very difficult for traditional broadcasters as their valuations have come under pressure due to the rise of digital."

A Sony-ZEEL combine would have been India's largest media company after Disney Star, which is currently in merger talks with Reliance Industries-owned Viacom18.

The biggest jolt to the deal came when the Securities Appellate Tribunal (SAT), while setting aside the Sebi order barring Goenka from holding the top position in the merged entity, allowed the regulator to continue its probe against him over alleged diversion of ZEEL funds. Sony was not comfortable having Goenka at the helm from a corporate governance point of view, said the people cited above.

The company suggested that Singh lead the merged entity and complete the integration of two culturally diverse organizations.

To be sure, Zee said Goenka had agreed to give up the leadership position of the merged company in the interests of the merger.

Goenka "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 said in its statement.

That assurance doesn't seem to have satisfied Sony.

"Sony was worried about the corporate governance blowback that the MNC could attract in Japan in the future if Goenka kept getting into trouble with regulators - and also they were getting increasingly concerned that Goenka would run the company as per his personal entrepreneurial style and not follow the corporate process-driven style that the corporation followed," said a person close to the deal.

Zee's top financial investors such as ICICI Prudential Mutual Fund (7.29%), Nippon India Life Asset Management (6.12%), HDFC Mutual Fund (5.26%), and LIC (5.12%) were tracking developments. They had multiple calls with the Zee management on developments, said people with knowledge of the matter.

Goenka has a few options still open, according to people close to ZEEL. In the last few days, he has been approached by some investors, according to them. A financial investor has offered to invest and discussions were also held with a powerful business group. Some possible partnerships with regional groups are also being looked at, they said.

"I think Punit has made up his mind," said a senior executive at Zee on condition of anonymity. "He will bring in an investor and restructure the business, keeping in mind the changes in the market, namely the Reliance-Disney deal and losses in digital businesses. His first order of the day now will be cutting down the Zee losses to a third in the next few months. He is not looking at a strategic partner for now, but he has a trick up his sleeve."

NV Capital managing partner Nitin Menon said the collapse of the plan has implications for M&A deals in the media space.

"We will have to see if this will lead to a realignment in the mergers and acquisitions space," he said. "Given the uncertainty over the last two years, it looks like the market might tilt towards becoming a seller's market, with content owners having a slight advantage when it comes to pricing their products given that the merger has fallen off."

Publicis Groupe South Asia CEO Anupriya Acharya said M&A deals, especially those involving big companies, are challenging because of the scale and complexities.

"Plus, the two parties need to agree on the objectives of the M&A activity, shared vision and the future of the merged entity, cultural and integration issues, etc," Acharya said. "Something that looks good on paper may not necessarily get concluded."

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Avinash Lohana (MUMBAI MIRROR; August 25, 2017)

Things have come to a head following the ongoing workers strike called by the Federation of Western India Cine Employees (FWICE) on August 15, demanding eighthour shifts, salary hike, accidental and medical insurance and workplace safety.

On Wednesday, a delegation of producers and broadcasters led by Punit Goenka, J D Majethia, Ekta Kapoor, Shyamashish Bhattacharjee and Nitin Vaidya met Chief Minister Devendra Fadnavis to convey their reservations.

“The police are doing a fabulous job but we feel threatened by protests outside Film City and other studios. We requested the CM to provide security to workers willing to work and maintain law and order. He called the Police Commissioner (Datta Padsalgikar) and has assured us protection, not only till the matter is resolved but even for a while after that,” says Majethia, co-chairman of the Indian Film and TV Producers Council, adding that many of the demands have been met. “We’ve given them a hike and insurance. Hygiene and food are being taken care of, I don’t understand this protest at all.”

Priya Gupta (BOMBAY TIMES; May 31, 2014)

Punit Goenka, 39, may have started off as a rebel, but has made his father Subhash Chandra proud today by being the successful MD and CEO of Zee Entertainment Enterprises Ltd, the flagship brand of the Zee group. He takes his professional decisions through consensus and looks up to his father for his principles and vision. He is a complete family man for whom his father's principle of standing by the word you have given is sacrosanct. Ahead of his upcoming new channel Zindagi (a first-of-its-kind Hindi channel which will carry content from across the border) on June 23, he opens up to Bombay Times about not just his channel, but also his own zindagi. Excerpts:

Why do you write your surname as Goenka even though your father writes Subhash Chandra?The joke is that it is to confuse the world. But the reality of it is that my great grandfather, who was very close to my father, during my naming ceremony just happened to call me 'Punit Kumar Goenka' and it remained that thereafter. My father, when he started Zee, did not want to be associated with any particular caste or religion, so had initially chosen to call himself Subhash Chander. But the international community could not pronounce it, so he renamed himself Subhash Chandra.

Talk about your father?He is very reserved. While he was born in a trader Marwari baniya family in Adhampur, Rajasthan, he moved to Hissar, where I was born. At a young age of 17, he was pulled out of his education and put in business, as the business was going through a bad phase. And from that time, he had the responsibility of taking care of his entire family and had a tough life. He is a strict father and a man of principles and that is what I admire about him. My younger brother Amit and I have some childhood memories of going on holidays with him, but mostly our memories are only about him working. Now, I see him far more relaxed as a businessman. The way we see him with his grandchildren is completely different from the man we grew up with. Our mother was more our support system while growing up.

Was it is an obvious choice for you to join your father?I was brought up in Delhi and most of my life was spent in boarding schools. I went first to Sanawar in Class V after which I did my high school in Switzerland. I then had to come back to Mumbai as my father said, 'I have wasted enough money on you. You don't deserve it. Come back, take admission, do B.Com and start working.' All my friends were moving to London or the US to study, whereas I had to come back and do B.Com. I didn't like returning home leaving my free life there. But I came back, started working at 18 and completed my B.Com by correspondence. I was more the rebel of the family. I was the first one in the family to have a love marriage. My wife Shreyasi used to live in the same building, Jolly Maker 1. We were friends, but our romance started later, due to common friends in Sydenham College. Friendship led to infatuation, led to several fights, before we decided three-and-a-half years later with two break-ups in between that we wanted to get married. It was a difficult thing for my family to accept, as in the eyes of my father, I was not capable of taking care of my family, even though he was doing very well. That's the man he is and his principles are such that if you are single-handedly not capable of taking care of a family, then you don't deserve to have a family. At that time, I thought I used to fear him, but now I realise that it was more out of respect. And today, I have become more friends with him. He never hit us. I have always worked with him and trained in several companies before being given a position. I started as the executive assistant to executive director Rajeev Santwan. I failed terribly in my first venture, which was to look after Zee Records that I ran into the ground in a year. I then became the CEO of Dish TV and was headquartered in Delhi for a year. Even though I was very passionate about it, living in Delhi just didn't work for me. I just didn't like the business environment and the people and culture of Delhi. I came to my father and said, 'This is not working out.' I then came back to Mumbai and worked my way up to become the MD and CEO of Zee Entertainment that today is our flagship company.

Who are you emotionally most attached to? My younger brother Amit. From early days, we have been more friends than brothers. I have never been uncomfortable sharing anything with him and he is a great anchor in my life. I didn't even realise when from being a protective elder brother we came to becoming buddies, sharing everything. And I know that this is a bond that will last forever. It's pretty obvious to my wife also. She knows that if I get a call from him even in the middle of the night, I will just get up and leave. I got married at a very young age while Amit was still a bachelor then, so he continues to live with my father while I live with my wife and kids. Eventually, we will all stay together and are building our family home in Churchgate. My father is more attached to him too and they are both alike. They are both always thinking of new stuff to do, whereas I like to focus on one thing at a time. They can multitask, I can't, which is why Amit runs close to five businesses while I run only one. I am a consensus kind of person, but my father finds me very soft. My father is more practical and a visionary and is a faster decision-maker than me. Visions don't come to me so easily. It comes to my brother.

In what way were you a rebel?I realise now what my father used to tell me and how right he was and it echoes in my head. By the time you realise that your father was right, you will have a son who thinks that you are wrong. When I was called back from Switzerland, I used to feel, we are not poor, then why am I being subjected to this? I may not be an 'A' student but at least I was not failing. I was getting 50% and would rather have time with friends and have beer as against studying. I started smoking at 15 and would flirt with girls. Even during my affair with my wife, I had two breakups and that time I would be flirting. Fathers always know everything about their sons. He hated it that I started smoking early as he used to smoke. And now he hates it more as both he and my brother have given it up. He didn't like the fact that just because it is easy for you, you don't care a shit about life. He would tell me, 'You have not seen the true meaning of what is true life.' I used to feel I have not seen hardships so how do you want us to know. But failures in life teach you many things. While it took me time to get my head on straight, I know that today he is proud of me.

Your new channel Zindagi launches June 23. Talk about it?To start with, it will have the best content from Pakistan. The way we currently tell our stories in India on TV is very different from the way in which some of the evolved audiences want to consume it. For instance, the differentiating factor will be that these are real life stories. The heroines in these shows don't get up decked up as if they are going for a wedding. They are not shot on some mega set but are based on real locations. We also have a lot of content from Turkey and Latin America that we will be remaking for the Indian market as the kind of things they show there are not what we can show in India on TV.

Have you been to Pakistan?My first visit was with the Zee delegation with my father as his executive assistant. We were state guests but my motivation to go there was that I had a few friends there from my school in Switzerland. So I managed to convince my father to get my visa extended by four days. Pakistanis are not any different from the way it is here. They may not go out clubbing, but they are just like us in India.What was your motivation to launch the Zee music label?The industry was suffering from a monopoly situation and while we were trading in the music business, we saw an opportunity to build an IP. Javed Akhtar sahab representing the industry reached out to my father and me, we met him and saw the opportunity and realised that to build our digital strategy, this was a great asset to have. One of the things my father has always been very passionate about has been owning the IP of content. So, while you can sell music for other people you are only traders. The industry's motivation of course was different.

Did the industry's fight against T-Series make it easier for you?Had the business been easy my father would not get into it. He has never treaded the weaker path anyways. And that is what gives us the kick to deliver what he sees. For me, it's never about ego, my decisions are always driven by the business perspective. And well, we are happy as we have signed on over 30 films and have the entire Fox and Viacom slate already.