Zee Entertainment Seeks Timeline Extension From Sony
In the ongoing turn of events in the merger saga between Zee Entertainment (ZEEL) and Sony Pictures Networks India, the National Company Law Appellate Tribunal (NCLAT) declined to grant a stay on the merger, despite objections raised by Axis and IDBI Bank. This development adds a new layer to the legal dispute over the establishment of a USD 10-billion media powerhouse in India.
On December 17th, an official disclosure made under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, discloses that Zee Entertainment has formally made a request to Sony for an extension of the timeline necessary to enact the composite scheme of arrangement. This request, as per the Merger Cooperation Agreement dated December 22, 2021, aims to facilitate the smooth implementation of the merger.
Commenting on the unfolding events, Karan Taurani, Senior VP, Elara Capital, expressed optimism about the extension of the merger timeline. He stated, "Extension of the merger timeline between Z and Sony is a positive in our view." He believes that the extension won't encounter regulatory hurdles, emphasising that NCLT approval is not time-bound. He also highlighted that appeals filed by Axis and other lenders in NCLAT are unlikely to negatively impact the merger.
Taurani suggested that negotiations between Zee and Sony may revolve around the CEO issue stating, "Sony may not want Mr. Punit Goenka as CEO of the merged co until the outcome of SEBI investigation is known."
He continues to believe that the merger is likely to proceed without Goenka unless the SEBI outcome favours him. The SEBI investigation, expected to take 8-12 months, may prompt Sony to consider appointing an interim CEO during this period.
Anticipating a resolution in the next 3-4 weeks, Taurani predicts that the Ministry of Information and Broadcasting (MIB) and the record date, and delisting/relisting process may take an additional 6-8 weeks. Consequently, he envisions the merged company getting listed by March/April 2024.
Previously, following Axis and IDBI Bank's request to halt the ZEEL-Sony merger, citing concerns over loan recovery, the NCLAT declined a stay. IDBI Bank, which granted a loan to the Essel Group with ZEEL's guarantee, argued that the merger might impede loan recovery. ZEEL countered, asserting IDBI and Axis Finance lacked legal standing due to insufficient capacity.
The court, acknowledging its previous merger approval, deferred the case to January 8 for detailed responses, signalling ongoing legal complexities.
