Zee drops after seeking merger deadline extension from Sony’s India unit

BENGALURU (Reuters) -Shares of India’s Zee Entertainment Enterprises fell nearly 4% on Monday before trimming some losses, as the media company over the weekend sought further extension for a merger deadline from the Indian arm of Japan’s Sony Group.

Zee Entertainment was last trading down 2.5% at 270.70 rupees.

The merger to create a $10 billion media and entertainment powerhouse, which was announced in 2021, won a key regulatory approval in August.

“As per our assessment, extension in merger timeline won’t have major regulatory hurdle, as the National Company Law Tribunal approval is not time bound, and this is only a mutually agreed date between two parties, which may not require shareholder or board approval,” said Karan Taurani, a media analyst at Elara Capital.

However, the merger has been delayed mainly after India’s markets regulator opened its investigation on Zee CEO Punit Goenka and a clash between the two companies over whose top executive would run the merged entity.

Sony is pushing for its Indian operations managing director N.P. Singh to head the merged company, as Goenka is under investigation, the Mint business newspaper reported in November.

The Securities and Exchange Board of India (SEBI) had in August alleged that Goenka and Zee Group Chairman Subhash Chandra were actively involved in diverting company funds. They have both denied any wrongdoing.

An Indian tribunal lifted a ban in October on Goenka holding board positions in Zee Group companies, but said he would have to cooperate with any investigation by India’s markets watchdog.

Although, the outcome of SEBI investigation could take 8-12 months, until which Sony may not wait and will propose to appoint a new CEO, said Taurani, adding that the negotiations between both parties could be resolved over the next 3-4 weeks.

(Reporting by Rama Venkat and Kashish Tandon in Bengaluru; Editing by Janane Venkatraman and Rashmi Aich)