After two years of negotiations, Culver Max Entertainment Ltd (previously Sony Pictures Networks India Private Limited (SPNI) has finally terminated its merger deal with Zee Entertainment Enterprises Ltd (ZEEL), saying the two could not agree on closing terms.

Sony, in its statement said, “Although we engaged in good faith discussions to extend the end date under themerger cooperation agreement, we were unable to agree upon an extension by the January 21 deadline. After more than two years of negotiations, we are extremely disappointed that closing conditions to the merger were not satisfied by the end date.

“We remain committed to growing our presence in this vibrant and fast-growing market and delivering world-class entertainment to Indian audiences,” it said.

While the union is off the table now, e4m re-visits the reasons for which the merger was initiated in 2021

The definitive agreement 

On December 2021, SPNI and ZEEL signed definitive agreements to merge ZEEL with SPNI and combine their linear networks, digital assets, production operations and program libraries. The agreements followed the conclusion of an exclusive negotiation period during which ZEEL and SPNI conducted mutual due diligence.

When the merger was initiated, it was decided that the new combined company would be publicly listed in India. However, the closing of the transaction was subject to certain customary closing conditions, including approvals from regulatory authorities, shareholders and third-party approvals.

The shareholders of SPNI decided to infuse growth capital into SPNI as part of the merger so that SPNI has approximately USD 1.575 billion at closing, for use in pursuing other growth opportunities. Based on anticipated equity values for ZEEL and SPNI, the merger ratio was 61.25% in favour of ZEEL. The projected infusion of expansion capital into SPNI was expected to result in 47.07% of the amalgamated company being held by ZEEL shareholders and the balance 52.93% of the merged entity to be held by SPNI shareholders.

Punit Goenka to head merged entity 

Initially it was decided that Punit Goenka would lead the combined company as its Managing Director & CEO. It was decided that majority of the board of directors of the combined company would be nominated by the Sony Group and could include the current SPNI Managing Director and CEO NP Singh. On closing, Singh would assume a broader executive position at SPE as Chairman, Sony Pictures India (a division of SPE) reporting to Ravi Ahuja, SPE’s Chairman of Global Television Studios and SPE Corporate Development.

Business synergies 

The merging of ZEEL and SPNI was intended to result in business synergies. Given their respective strengths in scripted, factual, and sports programming, as well as distribution footprints across India, the merged business might have been well-positioned to fulfil rising consumer demand for premium content across entertainment touchpoints and platforms.

If the merger had happened, the merged companies would have owned over 70 TV channels, two video streaming platforms – ZEE5 and Sony LIV – and film studios – ZEE Studios and Sony Pictures Films India – with a market share of 26%.

Revenue strength 

The FY23 operating revenue for Culver Max Entertainment Private Limited stands at Rs 6684.9 crore. The network runs 26 TV channels, a streaming platform – SonyLIV - and Studio NEXT, an independent production venture for original content and Sony Pictures Films India.

On the other hand, ZEEL’s operating revenue for FY23 is at Rs 8087.90 crore. The network has 50 channels in 11 languages, a streaming platform - Zee5 – Zee Studios, a film production company, and a music arm - Zee Music.