New Delhi:

According to a termination notice reviewed by Reuters, Sony has abandoned the $10 billion merger of its Indian arm with Zee Entertainment in part because Zee failed to meet some financial terms of the deal and failed to provide a plan to address those issues.

India's Zee denied the allegations in a letter to Sony, also reviewed by Reuters, and accused the Japanese company of “malicious intent” in calling off the merger.

A Zee-Sony merger in India would have created a media company with over 90 channels across sports, entertainment and news in the world's most populous country.

But Sony canceled the plans on January 22, saying in a statement that it did so because “closing conditions” had not been met after two years of negotiations. Neither Sony nor Zee made the content of the termination public.

Sony's statement, reviewed by Reuters, said Zee had not made “commercially reasonable” efforts to meet some financial thresholds, including in terms of cash availability, while a “lack of commercial prudence” by the Indian network was at fault contributed to the decision.

In the 62-page notice, Sony said that several breaches of the merger agreement were “irremediable” and any further attempts to discuss each other would be an empty formality, especially given Zee's clear rejection and failure to make a proposal to “protect Sony’s interests.”

“The violations committed by Zee are neither procedural nor technical in nature and will have a material impact on the transactions,” Sony said.

Zee responded privately to Sony a day later on January 23, stating that the company denied all of Sony's allegations and added that the Japanese company's demand for a $90 million termination fee was “legally untenable.” .

The termination was “done in bad faith” and “is unlawful and unlawful,” Zee wrote in his letter asking Sony to withdraw his termination.

A Zee spokesman declined to comment, while Sony did not respond to Reuters queries.

Zee shares have fallen about 30% since the deal collapsed.

The business has struggled over the years. Zee's advertising revenue fell to $488 million in fiscal 2022-23, compared to around $600 million five years earlier. Cash reserves fell from $116 million to $86 million during this period.

Sony said in its termination notice that Zee's cash balance was 4.76 billion rupees ($57.26 million) as of September 30, adding that this was “significantly below the requirements” of the merger agreement.

Reuters reported last week that Sony was also concerned that Zee CEO Punit Goenka – who was set to lead the merged company – is facing a regulatory investigation over the alleged diversion of company funds – allegations he has denied. The “ongoing investigation” was cited in Sony’s statement.

Zee was “unable to realistically estimate the time frame required to resolve all outstanding issues,” Sony's termination notice said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)