NCLT directs NSE, BSE to 'reassess' approvals for Zee-Sony merger

The Mumbai bench of the National Company Law Tribunal (NCLT) has directed the National Stock Exchange and Bombay Stock Exchange to reconsider their respective initial approvals for the Zee-Sony union and issue updated no-objection certificates before the next hearing, posing fresh obstacles for the proposed merger of the media companies.

The division bench, headed by judicial member HV Subba Rao and technical member Madhu Sinha, will now hear the case on June 16.

In its May 11 order, the NCLT has instructed the exchanges to reassess and validate the non-compete clause of the merger, which had previously received approval from both the exchanges and the Securities and Exchange Board of India (Sebi).

The NCLT directive to the exchanges comes after an adverse interim ruling by Sebi on a promoter entity of the Essel Group, which founded Zee.

The stock exchanges have also been directed to review whether the payment method for the non-compete fee between two Mauritius entities complies with the relevant Sebi policies.

Under the terms of the proposed deal, Sony Pictures Entertainment will indirectly hold a majority of 50.86% in the combined company, while the founders of Zee will own 3.99%, and 45.15% will be with the other shareholders of Zee, including the public.

Sony will also pay a non-compete fee of ₹1,100 crore to the Essel Group promoters. Zee and Sony signed definitive agreements in December 2021 to merge their businesses.

The proposal has already received approval from the BSE, NSE, and Zee shareholders. The Competition Commission of India has also approved the merger with modifications.

Last week, Sony Corporation CEO Kenichiro Yoshida said the merger between Sony Pictures Networks India (SPNI) and Zee Entertainment Enterprises (ZEEL) is expected to be completed by September this year.

The merger scheme, however, has been opposed by creditors to the Essel Group and Zee and some other entities. These include Axis Finance, IDBI Bank, IndusInd Bank, the Indian Performing Rights Society (IPRS), and Imax Corporation.

Zee has already reached a settlement with Indian Performing Rights Society and IndusInd Bank. It is in talks with other creditors to resolve the dispute and conclude the merger deal. The Zee-Sony merger hinges on NCLT clearance.