Sony-Zee merger teeters on the brink amid leadership dispute

The proposed merger between Sony Group Corp.'s India unit and Zee Entertainment Enterprises Ltd. is at a critical juncture, facing the possibility of a collapse just before the impending deadline next week, as reported by various sources.
The companies find themselves in a race against time to resolve the impasse surrounding leadership appointments, and in the absence of a resolution, Sony is poised to formally notify Zee that the specified requirements for the merger cannot be met. This dilemma stems from a disagreement over Zee's insistence, based on the 2021 agreement, that its CEO, Punit Goenka (also the founder's son), lead the new entity. Sony, however, expresses caution due to an ongoing regulatory probe against Goenka.
Sources, speaking on the condition of anonymity, suggest that unless an agreement is reached on leadership and other final merger details, Sony is likely to convey its inability to proceed with the merger in a letter to Zee next week. This potential development could be detrimental to the deal, given the limited time available to address all outstanding issues before the formal deadline of December 21.
Zee asserts its active efforts to fulfill all prerequisites for the deal, having completed most of them. In contrast, Sony's representatives have not issued any comments on the matter. The core of the disagreement revolves around a regulatory probe initiated by the Securities and Exchange Board of India (SEBI) in June. SEBI accuses Zee of falsifying loan recovery to conceal private financing deals by its founder, Subhash Chandra. Despite Goenka receiving reprieve from an appellate authority against the SEBI order, Sony considers the ongoing probe a lingering corporate governance concern.
This last-minute standoff poses a significant threat to a two-year-old merger plan meant to create India's largest entertainment company, positioned to compete globally with giants like Netflix and Amazon. Although the proposed merger has received almost all regulatory approvals, the leadership dispute remains as a stumbling block. Sony is not considering an extension beyond the December 21 deadline, though the partners can seek an extension from India's company court.