The Singapore International Arbitration Centre (SIAC) has rejected the emergency arbitration petition filed by Sony Group against Zee Entertainment Enterprises over their failed merger, citing lack of jurisdiction. The petition was filed after Sony terminated the merger agreement that would have created a $10 billion entertainment giant in India.
Background of the merger
Sony Pictures Networks India had announced its intention to merge with Zee Entertainment in September 2023, in a deal that would have given Sony a 52.93% stake in the combined entity and Zee shareholders a 47.07% stake. The merger was expected to create synergies in content, distribution and advertising, and enhance the competitive position of the merged entity in the Indian media market.
Reasons for termination
However, Sony terminated the merger agreement in January 2024, alleging that Zee did not comply with several pre-conditions set in the merger agreement, such as maintaining a minimum cash balance and obtaining necessary approvals from lenders and regulators. Sony also claimed that Zee’s managing director and CEO Punit Goenka was not fit to lead the merged entity, after he was accused of fund diversion by the Securities and Exchange Board of India (SEBI). Sony sought $90 million as termination fees from Zee, which Zee denied and counterclaimed.
Legal proceedings
Zee approached the National Company Law Tribunal (NCLT) in Mumbai, seeking directions to implement the merger scheme that was approved by the NCLT in August 2023. Zee also initiated legal actions to contest Sony’s claims at the SIAC. Sony filed an emergency arbitration petition at the SIAC, seeking to restrain Zee from pursuing the NCLT case and enforcing the merger. However, the emergency arbitrator denied Sony’s plea, stating that it lacked jurisdiction to interfere with the statutory system and that the NCLT was the appropriate forum to decide on the matter.
Implications of the outcome
The rejection of Sony’s petition by the SIAC is a setback for the Japanese company, as it means that Zee can continue to seek enforcement of the merger scheme at the NCLT. The outcome also indicates that the SIAC does not have the authority to override the decisions of the Indian courts and regulators on matters related to mergers and acquisitions. The fate of the merger now depends on how the NCLT will rule on Zee’s petition and whether Sony will appeal against it.