Sony calls off merger with India media giant Zee

Sony's Indian arm has scrapped a planned merger with Zee Entertainment which would have formed one of India's largest entertainment groups.

The $10bn merger, first announced two years ago, was set to combine more than 75 television channels, film assets and two streaming platforms.

Sony said merger conditions had not been met, but there have been reports of a disagreement over leadership.

In response, Zee said it could take legal action against Sony.

The closing date for the deal had been set as 20 January, but Sony said this was not met "as, among other things, the closing conditions to the merger were not satisfied by then".

When the deal was originally announced, Zee chief executive Punit Goenka was set to lead the newly-merged company.

However, Sony is reported to have been unhappy with this after India's market regulator launched a probe into Mr Goenka.

In a statement, Zee said that Sony was seeking a $90m (£70.8m) termination fee as result of alleged breaches of the terms of the merger, but said it "categorically denies" the allegations.

Zee added that "all efforts and steps were taken by ZEEL [Zee] in line with the Merger Cooperation Agreement, approved by its shareholders and all regulatory authorities".

The company said it was now "evaluating all the available options".

Zee added it would take "all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action".

It also said that Mr Goenka has been "agreeable to step down in the interest of the merger and proposals in this regard were discussed".

When the deal was first announced, the newly-planned firm was set to become a major media player in the country, challenging rivals such as Walt Disney's Hotstar.

Both firms have operated in India for years and own streaming platforms ZEE5 and SonyLIV. They also have a vast TV following with popular channels such as Sony MAX and Zee TV.

The merger was also seen as key to providing a rival to the planned merger between Disney's Indian businesses and the media assets of Reliance Industries.

"A deal collapse will have a negative impact on both parties as they were looking at scaling up in the Indian market which is going through a digital disruption and a potential threat of increased competition intensity if the Reliance-Disney deal goes through," Karan Taurani, an analyst at Elara Capital, told Reuters.

India is becoming an increasingly lucrative market for streaming platforms that are targeting a young digital audience.

The past few years have seen a surge of competition from streaming platforms such as Netflix, Amazon and Hotstar.