There is a lot of drama going on over the failed merger atempt between Sony and ZEE. An emergency arbitrator of SIAC has rejected a plea of Culver Max and BEPL. They had sought an order to restrain Zeel from approaching any corporate dispute tribunal or the National Company Law Tribunal (NCLT) for enforcing the merger that was called off by Sony.
SIAC on Sunday rejected the plea, citing lack of its jurisdiction. Prior to the SIAC ruling Zeel had approached the NCLT, Mumbai bench, seeking directions to implement the merger scheme. NCLT accepted the petition. Zeel is also challenging the $90 million termination fee that Culver Max is seeking.
After SIAC’s decision Sony Pictures Entertainment said, “We are disappointed in the decision by the Singapore International Arbitration Centre (SIAC). This decision is only a procedural one, ruling only as to whether Zee Entertainment would be permitted to pursue its application with the NCLT.
“We will continue to vigorously arbitrate the matter in Singapore in front of a full SIAC tribunal and pursue SPNI’s right to terminate the merger agreement and seek a termination fee and other remedies. We remain confident in the merits of our positon in both Singapore and India.”
Speaking to Medianews4u.com Sapna Chaurasia, Partner TMT Law Practice said that strategically, Zeel moving NCLT has maintained the pressure. Now that the SIAC has rejected Sony’s emergency petition and thereby rejected to stay Zee proceedings before the NCLT and other forums, moving NCLT appears to be a good decision. She also noted that the termination fee amount, as claimed by Sony is huge, which will act as driving factor for both parties to prove their point
“NCLT had approved the merger of Sony and Zee in August 2023. In January 2024 Sony terminated the agreement on the grounds of violation of the terms of the merger and sought a termination fee of $90 million from Zee. Accordingly, Zee moved NCLT requesting the Tribunal to order Sony to honour its obligations to complete the merger. Simply put, Zee moved NCLT seeking enforcement of the terms of the agreement. As NCLT had approved the merger Zee seems to have approached NCLT and correctly so as NCLT would have approved the terms which are now alleged to have been broken by Zee.”
She went on to note that in a recent development, Sony had moved an emergency petition before the Singapore International Arbitration Centre (SIAC) preventing Zee from seeking legal remedies before NCLT and other legal forums. “However, SIAC on 4 February 2024 rejected Sony’s petition on the ground that it had no jurisdiction or authority to prevent Zee from approaching NCLT to implement the merger, since the same is statutorily permitted and is for the NCLT to decide.”
She went to state that on the other hand, there are two petitions before the NCLT: (i) by Zee; and (ii) by the shareholders of Zee viz. Mad Men Film Ventures. “While NCLT appears to have admitted the petition by Zee’s shareholder and has on 30th January 2024 given Sony three weeks’ time to respond to the plea. Zee’s petition is yet to be taken up by the NCLT.”
She expects a protracted legal battle to ensue. “Issuance of the termination notice is evidence that there are major difference(s) and deadlock(s) and unless the same are resolved the legal battle may continue. Also, the termination fee amount, as claimed by Sony is huge, which will act as driving factor for both parties to prove their point.”
She noted that the 90 million dollars termination fees is a major part of this dispute and SIAC / NCLT will have to decide if there is a breach of the terms of merger by Zee and if yes, is the said termination fees payable by Zee. “One will have to wait and see the outcome for this aspect.”
She goes on to note that there is a high probability of Disney-Star India suing Zeel for breach of the sub-licensing agreement for the International Cricket Council (ICC) broadcast rights. Disney-Star India had secured the ICC TV and digital rights for India for $3 billion in 2022. Disney-Star India then sub-licensed the TV rights for the men’s and under 19-global events rights to Zee. “Zee has in its FY 2023 annual report stated that the acquisition of the ICC TV rights is contingent upon fulfilling certain conditions precedent such as submitting financial guarantees and obtaining ICC’s approval for sub-licensing the rights to Zee. It appears that Zee has not furnished the necessary bank guarantees to Disney-Star and this will be a clear breach of the terms of the sub-licensing deal. Given the proposed merger between Disney-Star and Viacom18 this will be a crucial point for consideration during the due-diligence and valuation process and thus, high probability of Disney-Star suing Zee for breach of the sub-licensing agreement.”
She however feels that the failed Sony Zee merger will not have a major effect on Sony even if Disney-Star India merges with Viacom18. “Sony and Zee individually are also big players in the market. Yes the merger would have made them bigger but they are one of the strong players and even if the Disney-Star and Viacom18 merger is successful, this will not have a major effect on Sony.”
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