People like us who have grown watching tv serials and films on Sony and Zee at our dinner tables, and family gatherings should know about the recent announcement of merger of Zee Entertainment with Sony Pictures Network India (SPNI). Under the said merger, Sony will invest $1.57 billion in Zee, by which it will become the majority shareholder in the firm and Puneet Goenka will be the Managing Director and CEO of the merged entity.

If the deal goes right then, it will create India's second-largest entertainment network, thereby creating an entity with 75 TV channels, two video streaming services (ZEE5 and Sony LIV), two film studios (Zee Studios and Sony Pictures Films India) and a digital content studio (Studio NXT).

The merger of ZEEL and SPNI would bring together two leading Indian media network businesses, benefiting consumers throughout India across content genres, from film to sports. The combined company is expected to benefit all stakeholders given strong synergies between ZEEL and SPNI, a statement from Sony Pictures said.[1]

What is a merger?
A merger is the combination of two companies to form one. This means that at least one of the two companies loses its legal identity after transferring all its assets and liabilities to the other company.

Types of Mergers:

1. Horizontal Merger:
   In this type of merger, two companies which are in direct competition consolidate. Example: Ford and Volvo, Disney+ and Hot Star
    
2. Vertical Merger:
   Basically, both companies which merger have a customer- supplier relationship. Example: Ford and Bendix
    
3. Conglomerate Merger:
   The companies which merge have no common business or no common relationship. They may sell related products. Example: Merger of a textile industry with an automobile industry.
    
4. Concentric Merger:
   Companies which are going to merge have products complementary and supplementary to each other. Example: DVD company and DVD Player company

Why do any company merge with the other?
Ministry of Corporate Affairs addressed this question in their Report of the Expert Committee on Company Law which says: Mergers and acquisitions are used as instruments of momentous growth and are increasingly getting accepted by Indian businesses as critical tool of business strategy.

They are widely used in a wide array of fields such as information technology, telecommunications, and business process outsourcing as well as in traditional business to gain strength, expand the customer base, cut competition or enter into a new market or product segment.

Mergers and acquisitions may be undertaken to access the market through an established brand, to get a market share, to eliminate competition, to reduce tax liabilities or to acquire competence or to set off accumulated losses of one entity against the profits of other entity.[2]

Background of the companies:
ZEE:
Zee was launched as Zee Telefilms in December 1991, then in 1999 it launched a Nickelodeon-branded programming block which was a part of their deal with Viacom International. Zee Telefilms acquired 51% and 50% stakes in ETC Networks and Taj television by the end of 2006. In the same year, it was renamed as Zee Entertainment Enterprises. In 2008, Zee Motion Pictures and Zee Studios (then Zee Limelight) were launched, which were an attempt to develop, produce and market films in different Indian languages including Hindi, Marathi, Bengali, Tamil, Telugu etc.

Sairat (Marathi-language romantic tragedy film, directed by Nagraj Manjule) and 2016 blockbuster-hit film Rustom are some of the creations of Zee Studio's productions. In 2011, Star Den went for a joint venture with Zee which distributed all the channels of Zee in India, Nepal and Bhutan. In 2017, ZEE acquired the majority stake of the Reliance Broadcast Network and it also planned to acquire 9X Media in October but the plan fell through in March 2018.

SONY:
Sony Pictures Networks India Pvt Ltd. is a wholly owned subsidiary of Sony Group Corporation which was founded on 18th September, 1995 as Sony Entertainment Television India private limited whose first channel which was launched was Sony Entertainment Television. Sony Max, being the second channel to be launched, broadcasted Hindi movies and sports events. In 2005, it bought SAB TV and rebranded it as Sony SAB. In the following year, the English movie channel Sony Pix was launched. In December 2015, the company was rebranded as Sony Pictures Networks India (SPNI).

Outline of the merger between Sony and ZEE: A Big Bang Entertainment Deal
An agreement as signed in September by both the companies which tells that the two companies will be combining their linear networks, production operations, digital assets and program libraries. The term for due diligence as fixed by both of the companies is an exclusive period of 90 days in which they will bring to light the negatives and positives of the said transaction and then finalize the deal. The process of due diligence has been started in the mid of October and is in at its highest now. The merged company will be a publicly listed company in India having Sony's shareholders 52.93% stake, while ZEE shareholders will hold 47.07%.

Sony-ZEE merger: A win- win for both?
We know that, ZEE has most of its channels in regional languages showing regional serials and movies, which is why ZEE has an upper hand in terms of network viewership share. Whereas Sony has a secured position in Hindi Entertainment and sports channels. Observers have suggested this merger could be a great deal as both complement each other and further help ZEE put an end to the recent concerns raised by large shareholders with respect to the issues related to corporate governance.

On the other hand, Sony Pictures Networks can make the most out of this merger and give a tough competition to the Disney-Star collaboration which now-a-days leading the content horizon. Sony can use ZEE's present entertainment and theatre business networks to broadcast, produce and market both within India and overseas. This will fill the gap as Sony was largely dependent on seasonal shows like Super Dancer and Kaun Banega Crorepati for its success.

What about their OTT platforms?
With the advent of pandemic, OTT platforms have been the most favourite source of entertainment of the general people. So, merging Sony and Zee together, will have the higher chances of potential synergies between their OTT platforms that are SonyLIV and ZEE5. The OTT market is undoubtedly ruled by Netflix, Amazon Prime and Disney+Hotstar. But Sony and Zee- getting together can give tough competition to them and might dominate the market. While, the question upon the merger of these two OTT platforms are yet to be decided that whether they will work as one brand or exist separately.

Impact of this merger on Zee Group's other corporate entities:
According to the information, the listed companies like the Zee Group's news media and education businesses are not included in this merger deal as they are held under different corporate entities - Zee Media Corporation Ltd and Zee Learn Ltd, respectively. So, this will not have any impact on any of these.

Conclusion:
According to me, this merger has a bright future as both the companies are doing great individually in their respective domains and the collaboration between the two will help in building one of the largest entertainment platforms. Both companies as one single entity has a potential to outgrow its competitors. But definitely a successful merger depends upon a number of factors, like due diligence process, right communication between the parties, experience from previous mergers, strategic plan etc. For a successful merger all these factors must be considered and acted upon.

End-Notes:

1. https://www.thehindu.com/business/Industry/sony-pictures-zee-entertainment-initiate-merger-talks/article36602669.ece (last accessed on 21st Oct 2021)
2. Ministry of Corporate Affairs. (2021). Report Of the Expert Committee on Company Law. ( https://www.mca.gov.in/MinistryV2/mergers+and+acquisitions.html)
   
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