ZEE Entertainment Enterprises categorically denies alleged breaches in agreement after receiving merger termination notice from Sony

ZEE Entertainment Enterprises Ltd (ZEEL) on Monday categorically denied assertions raised by Culver Max Entertainment Pvt Ltd (formerly Sony Pictures Networks India) (Culver Max) and Bangla Entertainment Pvt Ltd (BEPL) on alleged breaches under the terms of a merger co-operation agreement dated December 21, 2021, after the two sought to invoke arbitration and seek interim reliefs against ZEEL. 

ZEE Entertainment Enterprises said it was evaluating all the available options, including legal action, in order to protect the long-term interest of its shareholders, after the media and entertainment giant received communications from Culver Max and BEPL, purporting to terminate the merger co-operation agreement (MCA) and seeking a termination fee of $90 million on account of alleged breaches by ZEEL. 

ZEE Entertainment Enterprises’ board of directors, in a meeting on Monday, noted that all efforts and steps were taken by the company in line with the merger co-operation agreement, approved by its shareholders and all regulatory authorities, and that it has consistently worked towards the implementation of the mentioned scheme in the interest of the shareholders. 

“The Board of Directors has taken note of Sony’s letters purporting to terminate the Merger Co-operation Agreement, on the Company’s proposed merger with and into Culver Max Entertainment Pvt. Ltd, invoking arbitration and seeking interim reliefs. We are evaluating the next steps and considering the appropriate course of action,” said R Gopalan, Chairman, ZEE Entertainment Enterprises. 

“The Board has noted that the Company took all the required steps in the course of its integration journey over the last two years, to ensure that the scheme is implemented at the earliest. That said, the Board would like to assure its stakeholders that the Company will take all the necessary actions, in the best interest of all stakeholders, including by taking appropriate legal action and contesting Culver Max and BEPL’s claims in the arbitration proceedings. The Board has complete faith in the highly experienced senior management of the Company and will continue to guide the team. We recognise and value the trust our shareholders and stakeholders place in us, and we express gratitude for their continued support,” Gopalan added. 

The ZEEL board 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,” ZEE Entertainment Enterprises said. 

ZEEL held several deliberations and good faith negotiations with Culver Max and BEPL, with a view to considering an extension of the merger completion timeline, which did not materialise.

ZEEL said it has displayed utmost commitment towards the merger by undertaking several permanent and irreversible steps, resulting in one time and recurring costs for ZEEL. Despite this, the company will continue to evaluate organic and inorganic opportunities for growth, leveraging the intrinsic value of its assets. 

ZEE Entertainment Enterprises inked the merger co-operation agreement with Culver Max and BEPL on December 21, 2021, in relation to the Composite Scheme of Arrangement, which was approved by the Mumbai bench of the National Company Law Tribunal (NCLT) on August 10 and August 11, 2023, respectively.

Under the agreement, 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 the completion of the transaction as per the terms of the MCA. 

“During this period, despite conducting numerous deliberations in good faith, 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 said. 

ZEEL added that its MD and CEO, Punit Goenka, was agreeable to step down in the interest of the merger and proposals in this regard were discussed, including for appointment of a director on the board of the merged company, protections for conduct of pending investigations and legal proceedings in the best interest of ZEEL’s directors and shareholders, and the consequent modifications to the scheme to incorporate the same. 

ZEEL proposed an extension of a maximum period of six months for the consummation of the transaction, however, Culver Max did not provide any counter proposal for an extension. These discussions did not result in any proposal from Sony but they rather have chosen to terminate.

ZEEL remains eternally grateful to its esteemed shareholders for their continued trust and belief in all its decisions. “ZEEL also expresses immense gratitude to the legal and regulatory authorities for their support in enabling the proposed merger and aims to continue working towards the overall growth of the sector and Indian economy at large. The Company recognies the efforts sown in by the teams, and remains grateful to all its business partners for their continued support,” it added.