Sony-Zee merger: Board meeting today to decide $10-bn deal

The fate of the $10 billion Sony-Zee Entertainment merger hangs precariously in the balance, with a crucial board meeting in Tokyo today. Sources close to the deal say Sony may walk away unless key concerns, including Punit Goenka's leadership role and outstanding conditions, are addressed.

The merger, once envisioned as creating India's media Goliath, is now strained by disagreements. Notably, Sony reportedly seeks Goenka's ouster as chief executive of the merged entity, a demand that hasn't gone down well with Zee. Additionally, unresolved conditions and Zee's declining profitability have fuelled friction.

Sony's strategy appears two-pronged. Culver Max Entertainment, its Indian arm, will convene its board, potentially setting the stage for Sony's larger Tokyo meeting. The Japanese giant is expected to prepare a resolution terminating the merger unless Goenka steps down and all outstanding conditions are met.

While Sony prepares for a potential break-up, Zee maintains hope. Representatives highlight ongoing talks and their efforts to find solutions. However, they haven't publicly addressed Sony's demand for Goenka's exit.

Sony's push for financial clarity is palpable. The company wants guarantees about Zee's finances, particularly in light of the declining net profit since the merger announcement. Auditing and adjustments are likely even if Goenka relents, sources say.

Despite the turmoil, Zee's stock surged over 7% on Wednesday, hinting at some investors clinging to hope. Zee remains a bigger player in the Indian media landscape with an 18% market share compared to Sony's 6%.

The merger faces the persistent shadow of regulatory investigations. While a court lifted the ban on Goenka and Subhash Chandra, questions remain, adding to Sony's frustration.

Sony's options include walking away, pushing for a hostile takeover, or finding a compromise on leadership and finances. It has already expressed support for its India head, NP Singh, as a possible interim solution.

The board meeting promises a pivotal moment for the merger. Whether it seals the deal or spells its demise remains to be seen.