Zed Sony deal: According to a report on Friday, Zed Entertainment Enterprises Ltd. paid an estimated Rs 700 crore to satisfy Sony's requirements in order to finalize the merger transaction. In the impending proceedings at the National Company Law Tribunal, the company run by Subhash Chandra intends to seek compensation for the Japanese media giant, amounting to Rs 700 crore. Zed plans to present these arguments before the NCLT bench in order to refute Sony's notice of termination and seek damages totaling $90 million.
The company has submitted legal documents to Hindu Businessline, which reported that it has incurred and paid for approximately Rs 700 crore towards the divestment of businesses, settlement of frivolous claims (against which Zed had a strong legal case), settlement of guarantees, obtaining tail insurance to Sony's satisfaction, discontinuing several businesses on Sony's instructions, and other related expenses.
The $10 billion mega-merger between the two companies was terminated by notice delivered by Sony Group to Zed Entertainment on January 21. In addition to filing for arbitration with ZEEL, Sony Group later requested $90 million for breach of terms. In its termination notice, Sony alleged that ZEEL failed to meet some financial terms of the merger, and did not come up with a plan to address them.
Whereas, ZEEL has denied the charges and there has been no material adverse effect in terms of the merger agreement as indicated in Sony’s termination notice. The report quoting legal sources said Zee is planning to show that it had multiple discussions with Sony, including discussions on the joint business plan where month-wise profit and loss, cash flows were discussed and provided to Sony.
According to the article, Zed and Sony have been in extensive discussions for a considerable amount of time with the goal of making the merger a reality. Zed carefully followed every strategic directive given by Sony in order to hasten the merger agreement. Zed spent a lot of time, money, and effort on the tasks that Sony had stated in order to accomplish this.
It was reported earlier this week that conflicts over more than 20 compliance issues caused the Sony and Zed merger plan to collapse. According to Reuters, the disagreement included things like Zee's failure to sell off some holdings in Russia and its $1.4 billion cricket rights agreement with Disney. Emails between top Zed executives and Sony's legal and M&A executives in Los Angeles and India exposed a backroom battle that ultimately resulted in Sony's decision to back out of the $10 billion merger.
There was a disagreement between Sony and Zee over four Russian subsidiaries dealing in content creation and distribution. The merger agreement had prohibited dealings with entities based in countries under US sanctions. Zee claimed the divestment process was delayed due to changing regulations in Russia.
"A number of events, circumstances, state of facts, conditions have occurred, which have, or are reasonably likely to have a 'material adverse effect' on the business, operations," Drew Shearer, a top Los Angeles-based Sony executive wrote in an email.
A week later, on Dec. 27, Zee's top India counsel Shyamala Venkatachalam accused Sony of attempting to "depict a narrative which has no basis in facts", saying Zee was dismayed by what it called was a "sudden volte face" from the company in bad faith.
