The Zee-Sony merger appears to have been pulled back from the brink of collapse after Sony Group Corporation (SGC) agreed to discuss the extension of the December 21 deadline to close the deal that was struck two years ago.

Zee Entertainment Enterprises Ltd (Zee) said on Wednesday that it had received an intimation from Sony group companies — Culver Max Entertainment Pvt Ltd and Bangla Entertainment Pvt Ltd — that they were prepared to enter “good faith negotiations” to discuss the possibility of extending the deadline under the terms of the merger agreement between the two sides.

Last Sunday, Zee had pleaded for an extension as the talks between the two sides had stalled over who would head the merged entity after Zee CEO and MD Punit Goenka was locked in a bitter legal battle with Sebi after the market regulator barred him and his father Subhash Chandra from serving on any group company or any merged entity as director pending a thorough investigation into accusations that the father-son duo had siphoned money out of group companies.

Goenka was supposed to serve as CEO of the merged entity under the terms of the agreement between the two sides. But Goenka’s run-in with the regulator had stalled the merger process as Sony was not keen to have Goenka as the chief executive of the media behemoth. The two sides were unable to break the deadlock as the deadline for the closure of the deal loomed.

CMEPL is an indirect wholly-owned subsidiary of Sony Group Corporation (SGC) and was earlier known as Sony Pictures Networks India (SPNI).

BEPL is also an indirect wholly-owned subsidiary of SGC and a part of the SGC Group. Sony is pursuing the merger with the Zee group through these two entities.

The fate of the deal hung in balance as SPNI said on Monday that it had not yet agreed to Zee’s plea for an extension of the deadline for closure. It went on to say that it was waiting to find out how the Zee group intended to complete the remaining critical closing conditions. This had raised apprehensions that the merger was likely to collapse.

The latest communication from Sony has breathed new life into the negotiations. Details about the fresh date by which the merger will have to be completed will be announced in the next few days.

“The company (Zee) is now in receipt of a communication from CMEPL and BEPL that they will enter into good faith negotiations as required under the Merger Cooperation Agreement (MCA) entered amongst the Parties — the company, CMEPL and BEPL — with a view to discussing the extension of the date required to make the scheme effective by a reasonable period of time,” Zee said in a regulatory filing with the BSE.

Market circles said the development is positive and it may see the Zee shares staging a relief rally on Thursday.

The Zee scrip crashed by over 7 per cent on the bourses as investors fretted over the possibility that the merger would be called off. The stock closed at Rs 251.80 on the BSE, clocking a loss of 7.31 per cent or Rs 19.85.

Under the terms of the 2021 agreement between the two sides, the deadline can be extended three times.

However, SPNI’s statement on Monday had suggested that it is proceeding cautiously and not rushing into an extension. This could be on account of the regulatory hurdles that the merger or, more particularly, Goenka has been facing.

It was in September 2021 that SPNI and Zee entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations and programme libraries. While Goenka was supposed to lead the merger entity, a big hurdle arose when Sebi barred Essel Group chairman Subhash Chandra and Zee MD and CEO Goenka from holding the position of a director or key managerial personnel in a listed company.

However, the Securities and Appellate Tribunal (SAT) has quashed the market regulator’s order.

In a confirmatory order passed in August, the market regulator had said it will complete the investigation into alleged diversion of funds within eight months.

CMEPL has reportedly been insisting that Sony Pictures Network head N.P. Singh should lead the merged entity because of the legal hassles that the father-son duo is facing. Zee has turned down the suggestion.