If Zee-Sony merger fails, Zee could seek damages from Sony, according to a report.

Zee Entertainment Limited (ZEEL) may pursue legal action against Culver Max Entertainment (Sony India) for potential damages if their anticipated merger fails to materialize by January 20, as reported. Zee had to shut down profitable ventures to comply with Competition Commission of India (CCI) conditions, including divesting three Hindi channels. The failure of the merger at this stage would constitute a significant setback for Zee.

The 2021 deal between Zee and Sony had a two-year deadline set for completion by December 21, 2023. Initially, the agreement included a $100 million penalty clause for either party backing out, but it expired on December 21. An extension of 30 days was granted, with efforts to finalize the deal ongoing before the January 20 deadline. If Sony decides to dissolve the agreement, the expired penalty clause may exempt them from payment.

The merger aimed to combine Zee and Sony's linear networks, digital assets, production operations, and program libraries. Recent reports suggest Sony might terminate the $10 billion merger due to discomfort with Pawan Goenka leading the merged entity amid regulatory probes. Sony proposed replacing Goenka with Sony India head NP Singh, but Goenka, initially agreeable, later insisted on retaining the original terms after receiving temporary relief on the regulatory investigation.

Regulatory approvals from the CCI, NSE, BSE, shareholders, and creditors were secured for the proposed merger. However, Sony's concerns about Goenka's regulatory issues have led to uncertainties.

In June, the Securities and Exchange Board of India accused Goenka and Zee Group Chairman Subhash Chandra of diverting company funds. Although the Securities Appellate Tribunal lifted the ban on Goenka in October, allowing him to hold board positions, the shifting regulatory landscape has added complexity to the merger proceedings.

As of Wednesday, Zee Entertainment shares were trading at Rs 255.80, indicating a 0.93% increase from the previous close. The evolving situation poses challenges for the merger's successful completion before the looming deadline.