In an exchange filing made on Monday, ZEEL informed that its board has taken on record communications received from Culver Max Entertainment (formerly Sony Pictures Networks India) (Culver Max) and Bangla Entertainment (BEPL), purporting to terminate the merger co-operation agreement dated 21 st December 2021.

The entities have sought a termination fee of USD 90,000,000 on account of alleged breaches by ZEEL of the terms of MCA, invoking arbitration and seeking interim reliefs against ZEEL.

On 21 December 2021, ZEEL inked a merger co-operation agreement (MCA) with Culver Max and BEPL in relation to the composite scheme of arrangement, which was approved by the Mumbai bench of the National Company Law Tribunal (NCLT).

The arrangement involved merging ZEEL into Sony Pictures Networks India and combine their linear networks, digital assets, production operations and program libraries.

The merger would reportedly have created a $10 billion media giant with the financial muscle to take on global powerhouses Netflix Inc. and Amazon.com Inc.

The definitive agreements reportedly provided either party the option to terminate the deal by providing written notice if they are unable to agree upon such an extension by the end of the discussion period of two years.

Under the MCA, ZEEL exercised its right to require Culver Max and BEPL to enter into good faith negotiations for a period of 30 days to arrive at a mutual agreement on the extension of the end date by a reasonable period of time for completion of the transaction as per the terms of the MCA.

During this period, the parties failed to arrive at a consensus on the purported pending conditions precedent that required action on the part of both ZEEL and Culver Max, BEPL under the terms of the MCA. ZEEL proposed an extension of a maximum period of six months for consummation of the transaction, however, Culver Max did not provide any counter proposal for extension. These discussions did not result in any proposal from Sony and they have chosen to terminate.

As per media reports, Sony called off the merger, stating that Zee did not meet the conditions precedent, among them financial management and recovery of dues from the related party. The issue of Punit Goenka heading the merged entity was just one of the issues. There were others, including Goenka's directorship once he would have opted to step down and the strength of the balance sheet.

ZEEL has denied all the assertions raised by Culver Max and BEPL on the alleged breaches under the terms of the MCA, including their claims for the termination fee.

At the meeting held on 22 January 2023, the board of ZEEL noted that all efforts and steps were taken by the company in line with the MCA, approved by its shareholders and all regulatory authorities. It also acknowledged several deliberations held by ZEEL with Culver Max and BEPL, with a view to consider an extension of the merger completion timeline, and that did not materialise.

ZEEL’s board of directors is evaluating all the available options.

"Basis the guidance received from the Board, ZEEL will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings,” the company said in a statement.

ZEEL is a media & entertainment company offering entertainment content to diverse audiences. It is present across broadcasting, movies, music, digital, live entertainment, and theatre businesses, both within India and overseas.

The company reported 5.29% decline in consolidated net profit (from continuing operations) to Rs 129.88 crore in Q2 FY24 as against Rs 137.13 crore posted in Q2 FY23. Revenue from operations in Q2 FY24 was at Rs 2437.79 crore, registering a growth of 20.45% from Rs 2,023.89 crore recorded in the same period a year ago.