BANGALORE (Diya TV) — Sony’s proposed $10 billion merger with Zee Entertainment Enterprises in India is on the brink of collapse, primarily due to a disagreement over who will lead the combined entity. Despite ongoing discussions, sources reveal that Sony is gearing up to file a termination notice before the extended January 20 deadline for completing the merger.

The rift between the companies revolves around what are known as conditions precedents (CP), with disagreements over ZEE’s Managing Director, Punit Goenka, potentially becoming the CEO of the merged entity. The controversy intensifies as Goenka faces allegations of diverting funds from the publicly-traded Zee Entertainment Enterprises to closely held companies owned by his family’s Essel Group, where the Goenka family holds a 3.99% equity stake.

Zee Entertainment, however, remains steadfast in its commitment to the merger with Sony Pictures Networks India, now known as Culver Max Entertainment Private Ltd (CMEPL). The deadline for completing the merger had been extended to January 21, and Zee still desires to close the deal.

Originally designed to combine Zee Entertainment Enterprises and Sony’s linear TV networks, digital assets, production operations, and program libraries, the merged company was set to retain Zee’s stock market listing in India. Sony, in turn, would inject significant capital and control a majority share stake of nearly 51%.

Reports suggesting Sony’s intention to scrap the deal have led to a near 8% decline in Zee’s shares. Concerns loom over the fate of cash-strapped Zee in a highly competitive market, especially considering the impending merger of Reliance Industries and Walt Disney’s Indian media and entertainment businesses.

Analysts emphasize the critical importance of the deal for both companies’ survival, especially in the face of competition from streaming giants like Netflix and Amazon. Zee’s financial struggles, marked by a decline in advertisement revenue and a 68% slump in net profit, make the successful completion of the merger crucial for its stability.

The deal’s collapse could also impact Zee’s four-year pact with Disney’s Star for TV broadcasting rights of certain cricket events, potentially jeopardizing Zee’s financial commitments in the range of $1.32 billion to $1.44 billion.