CCI Approves Zee-Sony Merger, With Conditions

After a five-month-long wait, the Competition Commission of India (CCI) has finally given its approval to the merger deal between Zee Entertainment Enterprises Limited (ZEEL) and Culver Max Entertainment (Sony) with certain modifications.

The Competition Commission of India, on October 4, approved the merger of Zee and Sony with certain conditions. Competition watchdog put some restrictions to prevent Zee Sony from abusing its dominant position.

After a five-month-long wait, the Competition Commission of India (CCI) has finally given its approval to the merger deal between Zee Entertainment Enterprises (ZEEL) and Culver Max Entertainment (Sony) with certain modifications.

The two companies have reportedly offered to shut down some channels in genres where they are in a dominant position. The offer to shut down channels was offered as a remedy by Zee-Sony to allay CCI's concerns over the domination of the merged entity in certain markets.

"Commission approves amalgamation of Zee Entertainment Enterprises Limited (ZEE) and Bangla Entertainment Private Limited (BEPL) with Culver Max Entertainment (CME), with certain modifications," CCI said in a tweet.

Earlier, the National Company Law Tribunal (NCLT) had directed ZEEL to conduct a meeting of the equity shareholders of the company on 14 October for the purpose of considering the proposed merger with Sony. Prior to that, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) had approved the merger deal.

ZEEL, CME, which was earlier known as Sony Pictures Networks India (SPNI), and BEPL filed an application for combining their businesses on 29 April. CME is an indirect wholly-owned subsidiary of Sony Group Corporation (SGC). BEPL is also an indirect wholly-owned subsidiary of SGC and a part of the SGC Group.

In their application, CME and ZEEL had urged the CCI to keep the relevant product and geographic markets open while deciding on the merger application of the two companies. The two companies had also said that the merger of CME and ZEEL will not cause any appreciable impact on competition in the Indian media industry.

The operations of the two companies overlap in segments like (i) Operation and wholesale supply of television (TV) channels in India; (ii) Retail supply of over-the-top audio-visual (AV) content in India; (iii) Supply of advertising airtime on TV channels in India; (iv) Licensing of AV content in India; (v) Production and supply of films to third-party distributors and exhibitors for theatrical release in India; and (vi) Licensing of music rights in India.

In December 2021, CME and ZEEL signed definitive agreements to formally merge their operations. Under the terms of the definitive agreements, CME will have a cash balance of 1.5 billion USD by way of fund infusion by SGC and the promoters (founders) of ZEEL.

Under the transactions contemplated by a non-compete agreement, Sony Pictures Entertainment (SPE), through a subsidiary, will pay a non-compete fee to certain promoters (founders) of ZEEL, which will be used by such promoters (founders) to infuse primary equity capital into SPNI, entitling the promoters (founders) of ZEEL to acquire shares of SPNI, which would eventually equal approximately 2.11 per cent of the shares of the combined company on a post-closing basis.

After the closing, SPE will indirectly hold a majority of 50.86 per cent of the combined company, the promoters (founders) of ZEEL will hold 3.99 per cent, and the other ZEEL shareholders will hold a 45.15 per cent stake.

"We will now await remaining regulatory approvals to finally launch the new merged company. The merged company will create extraordinary value for Indian consumers and eventually lead the consumer transition from traditional pay TV into the digital future," said Sony Pictures Networks India.

At the time of the announcement of the merger deal, the combined entity had a market share of 27 per cent. In terms of revenue, Zee-Sony had a combined topline of Rs 13,452 crore in FY21. Sony-Zee will have 75 TV channels in India across general entertainment, sports, movies, regional, kids, infotainment, and niche genres. The merged entity will also have two video streaming platforms, SonyLIV and ZEE5.

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