Zee Entertainment incurred merger expenses of Rs 432 crore in the failed Sony deal

Zee Entertainment suffered Rs 432 crore in merger-related expenditures in the fiscal years 2023-24 and 2022-23 as a result of its unsuccessful merger with Sony Group Corporation's Indian media arm, Culver Max Entertainment.

The firm's merger-related expenditures were Rs 256 crore in 2023-24, up to Rs 176 crore the previous year. The merger agreement with Culver Max Entertainment was dissolved on January 22 owing to differences in leadership and unfulfilled closing conditions.

Signed in December 2021, the merger agreement had gained all necessary approvals from stock exchanges, the Competition Commission of India, and the National Company Law Tribunal.

Zee Entertainment suffered Rs 331 crore in impairment costs in 2022-23 as part of portfolio rationalisation and satisfying merger requirements as a result of the closure of some operations, notably Margo Networks. This indicates that the firms' value was lowered on Zee's financial accounts to reflect their decreased worth or operational discontinuance.

The business indicated that the impact on consolidated profits in 2022-23 was Rs 98 crore, as losses from these entities had already been reflected in previous financial statements.

Costs, claims, and arbitration

Furthermore, the business projected a liability of Rs 32 crore to cover shutdown costs in 2023-24. Zee Entertainment, which reduced its personnel by 15% as part of aggressive cost-cutting initiatives, also incurred an employee termination fee of Rs22 crore in a recent reorganization.

Why was the Zee-Sony merger called off?

Sony terminated the merger intentions on January 22, 2024, citing 'closing conditions' that were not met after two years of discussions. Sony's termination notification said that Zee failed to satisfy several financial terms and conditions of the merger agreement, including cash liquidity and a lack of commercial prudence.

There were also issues about the amalgamated entity's leadership, specifically Punit Goenka's choice as head. Due to an ongoing Sebi investigation against Goenka, Sony was hesitant to forward his candidacy.

Zee Q4FY24 Financials

Last week, Zee Entertainment Enterprises Ltd recorded a consolidated net profit of Rs 13.35 crore for the March quarter.

Zee Entertainment Enterprises (ZEEL) reported a consolidated net loss of Rs 196.03 crore for the same time in the previous fiscal year, according to a regulatory filing.

It said that the consolidated total income in the quarter was Rs 2,185.29 crore, up from Rs 2,126.35 crore in the same period last year.

Domestic advertising revenue increased by 10.6 percent year on year in the fourth quarter of FY24, owing to the sustained improvement in the macro advertising climate and expenditure increases by FMCG customers, while subscription revenue growth was driven by an increase in linear subscribers.