The sale of Sony's India business to Disney has begun

 The sale of Sony's India business to Disney has begun

Mumbai: According to two sources with firsthand knowledge of the situation, Sony Pictures Entertainment (SPE), the international entertainment division of Japan's Sony Group Corp., has started discussions with Walt Disney Co. regarding the possibility of buying the latter's India operations.

According to the sources, who asked to remain anonymous, Sony is having early negotiations with Disney as part of a backup plan in case its pending merger deal with Zee Entertainment Enterprises Ltd is significantly delayed or fails.

"The merger with Zee has seen its fair share of setbacks and has been in the works for over two years. One of the persons added, "SPE's parent company in Japan is becoming impatient with the hold-up and has requested to be ready with a Plan B.

India's top entertainment firm is Disney Star. It runs the well-known Disney+Hotstar online streaming service as well as more than 70 multilingual TV channels. Reliance Industries (owner of Viacom18), the Adani Group, and Sun TV Network are a few organizations that have looked about buying Disney's Indian operations whole or in part.

SPE and Disney spokesmen did not respond to emails containing questions.

Given the changing media and entertainment scene internationally and in India, industry analysts predicted that Disney's India operation may only fetch a fraction of its prior worth. Sports and internet have seen losses, compared to the linear entertainment industry's $500 million in earnings. Star India was worth $17 billion when it was bought by Disney as part of its $71.3 billion agreement to purchase Rupert Murdoch-owned 21st Century Fox.

Sony is losing patience with the ZEE deal. "The media and entertainment industries have seen significant transformation in the previous two years. The fact that Disney India was not for sale until six months ago is crucial. Top SPE executives now consider Disney India to be a superior option because of their shared cultural heritage, according to the second source. These conversations are still in the early stages, and Sony will only continue them if the Zee agreement falls through. However, the second source said, "They don't want to waste any more time and will move forward aggressively if that occurs, as the opportunity cost would be too high."

Notably, Fox and Disney formerly employed both Tony Vinciquerra, chairman and CEO of SPE, and Ravi Ahuja, head of global television studios and corporate development at Sony Pictures. Ahuja served as Walt Disney Television's president of business operations and chief financial officer until joining Sony in March 2021. While there, he was instrumental in the merger of Disney/ABC Television and Fox Networks after Disney's early 2019 acquisition of Fox. Before Walt Disney bought Fox Networks Group, Ahuja served as its CFO. Vinciquerra worked for Fox from 2001 to 2011 and was the company's chairman and CEO of the Fox Networks Group.

A major decline in value has been seen by Disney's India division, which includes Star India and the company's current India operations, as a result of the departure of key executives and the termination of content agreements with a few studios, notably HBO. Disney's choice to just own digital rights for ICC events, as opposed to its former control over the main cricket assets of the ICC, the BCCI, and the Indian Premier League, has further exacerbated this drop in value.

Disney's worldwide move towards its streaming business, prioritizing streaming platforms, is another indication of the dynamic character of the media and entertainment industry.

In a July interview with CNBC, Walt Disney CEO Bob Iger said that the corporation was considering to sell several of its linear television holdings since they "may not be core to Disney."

According to a Bloomberg article from last month, Disney had preliminary talks with the local broadcaster Nexstar Media Group about buying its linear holdings in the US—ABC and other TV networks. Reliance Industries, Adani Group, and Sun TV Network reportedly had early discussions with the corporation for Disney's India division, according to Bloomberg in India.

Despite these conversations, the merger between Zee and Sony has continued to move forward. According to schedule, integration talks with the Boston Consulting Group (BCG) are happening, Sony officials stated on condition of anonymity.

Zee and Sony Pictures Networks India (SPNI) reached an agreement to combine in December 2021. In this arrangement, SPE, the indirect parent of SPNI, agreed to spend around $1.06 billion as expansion capital for the combined company and to pay the founders of Zee a non-compete fee of $147 million.

The original target date for the deal's completion was March 31, 2022. But it wasn't until August 10 of the following year, after protracted proceedings in which several financial lenders to ZEE promoters contested the plan, that the Mumbai bench of the National Company Law Tribunal (NCLT) eventually approved the merger. Despite the fact that the merger plan has now been authorized, the Indian markets regulator has now forbidden Punit Goenka of Zee, who was set to serve as the combined company's managing director and CEO, from holding any important positions.

The Securities and Exchange Board of Canada of India (Sebi) accused Goenka of siphoning off funds and money circulation via connected firms in a confirmation order issued on August 14. Sebi also promised to wrap up the inquiry in eight months. The merger has been further delayed even though Goenka has contested the ruling at the Securities Appellate Tribunal (SAT).

According to a statement released by Sony last month, "The deal is presently expected to occur in the months ahead, even though the transaction was originally anticipated to close by the end of the first half of the fiscal year ending on 31 March 2024. Sony is still evaluating how the purchase may affect its consolidated financial performance.

According to a top media executive who has previously collaborated with SPNI, Sony's perspective on the Disney merger is likewise more favorable. "There is a vast difference between what Zee was in 2021 and what the company's financials are now. Although it is not the most appealing, it nonetheless remains a benefit. Second, even if SAT issues a stay order in Goenka's case, the inquiry can still go through, preventing Sony from appointing him as managing director and CEO. This was one of the contract's conditions. Even if Punit has said in media appearances that he is dedicated to the merger, with or without him, it will be challenging in the near future to find a leader for such a large firm," the source added while seeking anonymity.