The fate of the USD 10 billion merger between Zee Entertainment Enterprises and Culver Max Entertainment, formerly Sony Pictures Networks India, is hanging by a thread, with the two parties unable to finalise an agreement as the end of the one-month grace period looms.

The two parties are yet to come to an agreement over Zee Entertainment Enterprises Ltd (ZEEL) MD and CEO Punit Goenka leading the merged entity after Sony expressed concerns after market regulator Sebi barred him from holding managerial posts in Zee and any of the entities in a fund-diversion case.

Though the Securities and Exchange Board of India order was stayed by the Securities Appellate Tribunal, Sony is not comfortable with Goenka leading the merged entity due to the stringent corporate governance policy in Japan.

The contentious issue is not just over Goenka leading the merged entity, but the completion of the deal also depends on how the Indian firm is able to meet the other closing conditions, said an industry source.

The deal, which was signed between Zee Entertainment and Sony Pictures Networks India in 2021, has a stipulated period of two years in which the merger was to be completed before December 21, 2023, including regulatory and other approvals with a grace period of one month to complete the transaction.

By January 21, the one-month grace period for extended negotiations will end.

Comments from Sony and ZEEL could not be obtained.

According to reports, the bone of contention is the driving seat of the merged entity. As per the agreed terms and conditions, Goenka was to lead the merger entity.

However, Culver Max Entertainment Pvt Ltd (CMEPL) is insisting on making way for its Sony Pictures Network head NP Singh.

On December 17, the Subhash Chandra family promoted firm sought an extension of the December 21, 2023, deadline from Sony Group Corporation (SGC) firm Culver Max Entertainment and Bangla Entertainment Pvt Ltd (BEPL) under the Merger Cooperation Agreement dated December 22, 2021.

Earlier, Sony Pictures Networks India (SPNI) stated that it has not yet agreed to a deadline extension requested by ZEEL for their merger proposed USD 10-billion merger. However, a day after it agreed to discuss the matter.

The proposed USD 10-billion merger of ZEEL, BEPL and CMEPL has already received regulatory approvals from the fair trade regulator CCI, bourses NSE and BSE, shareholders and creditors of the company.

In August this year, the Mumbai bench of the National Company Law Tribunal (NCLT) also gave a go-ahead to the merger of ZEEL and Culver Max Entertainment.

This followed an interim order by Sebi barring Essel Group chairman Subhash Chandra and Zee Entertainment Enterprises Ltd MD and CEO Punit Goenka from holding the position of a director or key managerial personnel in any listed company. The market regulator took action after they were found diverting funds from the company.

Chandra and Goenka moved the Securities Appellate Tribunal (SAT) challenging the Sebi interim order. In October, SAT quashed the Sebi interim order.

Earlier in September 2021, then Sony Pictures Networks India and ZEEL entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations and programme libraries.

The combined entity will own over 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.

Subsequently, the two parties signed a definitive agreement for their merger in December 2022.

The majority of the board of directors of the combined entity would be nominated by the Sony Group and include the current SPNI Managing Director and CEO NP Singh.

However, questions over the future of the merger arose after Sebi's actions against Chandra and Goenka for siphoning off funds of ZEEL.

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