Zee Entertainment gets NCLT nod to end Sony dispute in 2024

What the NCLT order means for Zee

Zee Entertainment Enterprises Ltd. (ZEEL) said it has received approval from the National Company Law Tribunal (NCLT) to withdraw its application related to the arbitration process tied to its planned merger with Sony Pictures Networks India. The company disclosed the development through an official statement in its press release.

The order is significant because it closes a legal chapter that stretched for almost three years around what was once a headline deal in India’s media and entertainment sector. With the withdrawal allowed, the tribunal has effectively cleared the procedural path to end the merger scheme and related litigation before the NCLT.

Withdrawal revokes the earlier merger sanction

ZEEL said the NCLT agreed to the withdrawal of the composite scheme, which results in revoking the tribunal’s earlier order dated August 10, 2023. That earlier order had sanctioned the merger among ZEEL, Bangla Entertainment Private Limited (BEPL), and Culver Max Entertainment (CME).

Culver Max Entertainment is referred to in the article context as the entity formerly known as Sony Pictures Networks India. The withdrawal, and the associated revocation of the earlier sanction, underscores that the merger structure approved in 2023 will not proceed in its earlier form.

The settlement: non-cash, comprehensive, and mutual claim withdrawals

ZEEL and Sony Pictures Networks India said they settled their dispute relating to the failed USD 10-billion merger and agreed to withdraw all claims against each other. The companies described the resolution as a “comprehensive non-cash settlement” between ZEEL and Culver Max Entertainment Pvt Ltd (CMEPL).

As part of the settlement, both sides agreed to withdraw their claims in the ongoing arbitration at the Singapore International Arbitration Centre (SIAC), and also to withdraw related legal proceedings initiated at the NCLT and other forums. The joint statement also said the companies would withdraw the respective Composite Schemes of Arrangement from the NCLT and inform relevant regulatory authorities.

The joint statement added that none of the parties would have any “outstanding or continuing obligations or liabilities” to the other after the settlement.

How the dispute escalated after the deal collapsed

The merger had been positioned as a large consolidation in the broadcast and entertainment space. But the deal fell apart after Sony pulled out in January 2024. The article notes that Sony exited the proposed USD 10.5-billion merger citing failure to meet certain “closing conditions” by ZEEL.

The context also records that later in May 2024, ZEEL terminated the MCA (as cited in the provided text) by issuing a letter dated May 23, 2024. ZEEL also sought a termination fee of USD 90 million from two Sony Group entities - Sony Pictures Networks India (SPNI), now known as Culver Max Entertainment, and Bangla Entertainment (BEPL).

With the settlement now in place, the companies have said they will move forward independently.

Immediate stock-market reaction in ZEEL

After the NCLT approval to withdraw the arbitration-related application and scheme, ZEEL’s shares rose 3.26% to Rs 139.15 per share on the BSE on Friday, according to the text.

The broader context also highlights how the stock had reacted earlier when the merger was sanctioned in August 2023. On that day, ZEEL shares closed 17.95% higher at Rs 285.55 on the BSE, and another report cited the stock settling at Rs 281.45, up 16.18% on the NSE.

Key facts and figures at a glance

Background: what the merger structure looked like

The merger between ZEEL and Sony’s India TV business was originally announced in December 2021. The proposed combination was widely tracked because it could have created a USD 10-billion media entity and a large TV network with a cited 26% domestic market share.

In the deal structure described in the provided text, Sony was to indirectly hold 50.86% of the combined company, the founders of ZEEL were to hold 3.99%, and other ZEEL shareholders were to hold 45.15%. The text also mentions that the merged entity would have had a cash balance of USD 1.5 billion at closing, including via an infusion by the current shareholders of SPNI and the promoters of ZEEL.

Separately, the context includes a transaction detail that Subhash Chandra would be paid Rs 1,100 crore by Sony, which he would use to buy an additional 2% stake in the merged entity, taking the family’s stake to 4%.

Regulatory and creditor objections that framed the process

The NCLT’s August 2023 approval came after objections from several operational and financial creditors were raised. The text lists creditors such as Axis Finance, JC Flower Asset Reconstruction Co, IDBI Bank, Imax Corp, and IDBI Trusteeship as among those who objected.

There is also mention that the company reached settlements with IDBI Bank, IndusInd Bank, and the Indian Performing Rights Society (IPRS) in the period when objections were being discussed. The article context further notes that the Competition Commission of India (CCI) provided conditional approval on October 5, 2022, asking ZEEL to sell three Hindi channels - Big Magic, Zee Action, and Zee Classic.

In the 2023 proceedings, an advisor to the Zee group on the merger, Anuj Tiwari, Partner at ASR & Associates, is quoted in the text saying the NCLT order rejected “misconceived objections” and safeguarded stakeholder interests.

Why this matters now for investors and the sector

The NCLT allowing the withdrawal, combined with the settlement that commits both parties to withdraw SIAC arbitration claims and NCLT proceedings, reduces headline legal uncertainty around the failed merger. For ZEEL investors, the immediate impact was visible in the stock’s move to Rs 139.15 on the BSE on the day cited.

The provided context also notes that after the termination of the deal, both companies have been pursuing their independent course. It adds that ZEEL has been facing financial hurdles and is trying to handle them through several initiatives, without detailing those initiatives.

Conclusion

ZEEL’s NCLT approval to withdraw the merger-related arbitration application, along with the companies’ non-cash settlement to withdraw claims across SIAC and Indian legal forums, marks a formal end to the Zee-Sony merger dispute. The next procedural steps, as stated, include the parties informing relevant regulatory authorities after withdrawing the composite schemes from the NCLT.