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Why is Sony Group terminating the merger of its India unit with Zee Entertainment? REPORT
Japan's Sony Group Corp issued a termination letter to Zee Entertainment Enterprises Ltd, claiming its plans to call off the merger between its India unit.
Sony Group Corp. has officially informed Zee Entertainment Enterprises Ltd. that it intends to cancel the merger of its India arm with the media network, capping a two-year purchase process and leaving Zee susceptible to competition as rivals consolidate, according to a report by Bloomberg.
Earlier on Monday, the Japanese entertainment giant sent a termination letter to Zee early Monday and is anticipated to share the exchange later. Sony terminated the merger with Zee due to unmet requirements, according to the report.
Why is Sony Group terminating the merger of its India unit with Zee Entertainment?
The merger, announced more than two years ago, encountered leadership issues, which were worsened by the Securities and Exchange Board of India's (SEBI) investigation into Zee CEO Punit Goenka. The dispute appears to have ended the merger, which would have established a $10 billion media behemoth with the financial clout to compete with global powerhouses Netflix Inc. and Amazon.com Inc.
According to reports earlier this month, Sony intended to cancel the merger since the two sides were unable to resolve the leadership conflict. Zee later stated that they were continuing in talks to complete the deal. 
According to one of the sources, if Goenka leaves Zee, which has been experiencing financial difficulties, Sony may examine another merger deal. Zee's profit for the fiscal year ended March 31 fell 95% to 478 million rupees ($5.8 million) compared to the preceding period.
Sony's termination letter came after a 30-day grace period had expired over the weekend. During this time, the two parties were unable to achieve an agreement by the deadline in late December.
SEBI's accusations
In June, SEBI accused the Mumbai-based media company of faking debt recovery to conceal private financing agreements by its founder, Subhash Chandra. SEBI's interim ruling noted that Chandra and his son, Goenka, "abused their position" by diverting cash.
Although Goenka was granted relief from an appellate court against the SEBI ruling prohibiting him from holding an executive or director position in a publicly traded firm, Sony continued to view the ongoing investigation as a potential corporate governance issue.
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