Russia’s property before the India deal broke, conflict between Soni, Zee on cricket deal
New Delhi: Sony And Zee There are disagreements over more than 20 compliance issues, including the Indian company’s failure to dispose of some Russian assets and its first $1.4 billion Disney cricket rights deal from India. Fusion was cancelled, according to internal emails reviewed by Reuters.
Communications between Sony’s legal and M&A executives in India and Los Angeles with Zee’s top executives provide undisclosed details on the high-stakes backroom tussle that led to the Japanese firm’s January 22 move to stall the $10 billion merger. It happened before the decision.
Emails exchanged between December 20 and January 9 show executives from both companies accusing each other of not honoring merger commitments. Zee officials repeatedly said that nothing was off limits, and asked Sony to extend the closure deadline.
“Multiple events, circumstances, conditions of fact, conditions have occurred that have had or are reasonably likely to have a ‘material adverse effect’ on its business, operations,” wrote Drew Shearer, a top Los Angeles-based Sony executive. In an email.
A week later, on December 27, Zee’s top India lawyer Shyamala Venkatachalam accused Sony of “attempting to paint a story that has no basis in facts”, adding that Zee was disappointed. It was what the company called a “sudden counterattack.” Maliciousness.
Zee and Sony spokespersons declined to comment.
The Zee-Sony merger, which was in the works for two years, would have created an Indian TV juggernaut with over 90 channels across sports, entertainment and news that would compete with the likes of Walt Disney and billionaire Mukesh Ambani’s Reliance .
The collapse of the deal is a major blow to Zee, one of India’s most famous TV networks, which started in 1992 but has seen its business struggles over the years. Its shares have fallen 27% since the merger was cancelled.
Sriram Subramanian, founder of InGovern, a proxy advisory firm that advocates for investors’ rights, said mutual funds and other investors, which own 96% of Zee, are unaware of why the merger collapsed, as the company did not disclose any details. Has not given. “Investors deserve to know what was going on behind the scenes,” he said.
The emails reveal that there was a face-off between Sony and Zee over four Russian subsidiaries dealing in content creation and distribution, as the merger agreement does not stipulate any transactions with entities based in countries under US sanctions. Was. Russia Ukraine is under Western sanctions for the war.
In an email on January 5, Eric Moreno, executive vice president of corporate development and M&A at Sony Pictures Entertainment, said that Zee did not end ties with Russian entities, even though it was “absolutely critical”, and the merger was finalized. The entity “shall not under any circumstances be inherited by Russian entities”.
Zee’s lawyer Venkatachalam responded by saying the disinvestment process has not been completed due to changing regulations in Russia and alternative structures are being explored even though the business of those entities is “shut down in December 2022”, in an email address. walked.
Disney Deal, Small Loan
Reuters reported Sony’s confidential termination notice on Monday, showing that it also accused Zee of not meeting certain financial conditions, including required cash reserves. Zee denies those allegations.
Another key issue was Zee’s decision to strike a $1.4 billion deal with Disney to buy some TV cricket rights for India in 2022, the emails show.
Sony said that Zee has decided to provide bank guarantee and deposit amount totaling $406 million for that deal. And Zee’s bid to take on debt for the deal, which was “without Sony’s prior written consent”, took the Indian firm’s total debt to more than $451 million – above the limit in the merger agreement.
Moreno wrote in a January 5 email that Sony had repeatedly “raised our concerns and objections regarding the (Disney) alliance agreement… including with respect to the agreed-upon payment consideration.”
In response, Zee’s legal executive said that Sony’s allegations were made too late, and were “reprehensible and unfortunate”. The email argued that there was no violation of any terms of the merger in the cricket deal as both parties wanted to encourage Zee’s expansion into the sport.
Reuters has reported that due to lack of funds, Zee has decided to end its cricket deal with Disney.
Apart from the Disney deal, Sony accused Zee of several other merger agreement violations, the emails show, including launching a new channel in South Africa during negotiations and paying Rs 3.3 million to an affiliate in India without specifying a repayment period. Dollar lending is involved.
Zee said none of these things violated the terms of the deal. “We have incurred significant costs to ensure a successful merger between our companies,” Zee’s Venkatachalam wrote in an email.
Communications between Sony’s legal and M&A executives in India and Los Angeles with Zee’s top executives provide undisclosed details on the high-stakes backroom tussle that led to the Japanese firm’s January 22 move to stall the $10 billion merger. It happened before the decision.
Emails exchanged between December 20 and January 9 show executives from both companies accusing each other of not honoring merger commitments. Zee officials repeatedly said that nothing was off limits, and asked Sony to extend the closure deadline.
“Multiple events, circumstances, conditions of fact, conditions have occurred that have had or are reasonably likely to have a ‘material adverse effect’ on its business, operations,” wrote Drew Shearer, a top Los Angeles-based Sony executive. In an email.
A week later, on December 27, Zee’s top India lawyer Shyamala Venkatachalam accused Sony of “attempting to paint a story that has no basis in facts”, adding that Zee was disappointed. It was what the company called a “sudden counterattack.” Maliciousness.
Zee and Sony spokespersons declined to comment.
The Zee-Sony merger, which was in the works for two years, would have created an Indian TV juggernaut with over 90 channels across sports, entertainment and news that would compete with the likes of Walt Disney and billionaire Mukesh Ambani’s Reliance .
The collapse of the deal is a major blow to Zee, one of India’s most famous TV networks, which started in 1992 but has seen its business struggles over the years. Its shares have fallen 27% since the merger was cancelled.
Sriram Subramanian, founder of InGovern, a proxy advisory firm that advocates for investors’ rights, said mutual funds and other investors, which own 96% of Zee, are unaware of why the merger collapsed, as the company did not disclose any details. Has not given. “Investors deserve to know what was going on behind the scenes,” he said.
The emails reveal that there was a face-off between Sony and Zee over four Russian subsidiaries dealing in content creation and distribution, as the merger agreement does not stipulate any transactions with entities based in countries under US sanctions. Was. Russia Ukraine is under Western sanctions for the war.
In an email on January 5, Eric Moreno, executive vice president of corporate development and M&A at Sony Pictures Entertainment, said that Zee did not end ties with Russian entities, even though it was “absolutely critical”, and the merger was finalized. The entity “shall not under any circumstances be inherited by Russian entities”.
Zee’s lawyer Venkatachalam responded by saying the disinvestment process has not been completed due to changing regulations in Russia and alternative structures are being explored even though the business of those entities is “shut down in December 2022”, in an email address. walked.
Disney Deal, Small Loan
Reuters reported Sony’s confidential termination notice on Monday, showing that it also accused Zee of not meeting certain financial conditions, including required cash reserves. Zee denies those allegations.
Another key issue was Zee’s decision to strike a $1.4 billion deal with Disney to buy some TV cricket rights for India in 2022, the emails show.
Sony said that Zee has decided to provide bank guarantee and deposit amount totaling $406 million for that deal. And Zee’s bid to take on debt for the deal, which was “without Sony’s prior written consent”, took the Indian firm’s total debt to more than $451 million – above the limit in the merger agreement.
Moreno wrote in a January 5 email that Sony had repeatedly “raised our concerns and objections regarding the (Disney) alliance agreement… including with respect to the agreed-upon payment consideration.”
In response, Zee’s legal executive said that Sony’s allegations were made too late, and were “reprehensible and unfortunate”. The email argued that there was no violation of any terms of the merger in the cricket deal as both parties wanted to encourage Zee’s expansion into the sport.
Reuters has reported that due to lack of funds, Zee has decided to end its cricket deal with Disney.
Apart from the Disney deal, Sony accused Zee of several other merger agreement violations, the emails show, including launching a new channel in South Africa during negotiations and paying Rs 3.3 million to an affiliate in India without specifying a repayment period. Dollar lending is involved.
Zee said none of these things violated the terms of the deal. “We have incurred significant costs to ensure a successful merger between our companies,” Zee’s Venkatachalam wrote in an email.
