Sony-Zee $10 bln media play might face adjustments, delays in India antitrust evaluation

A full-scale antitrust evaluation of plans to create a $10 billion media powerhouse in India by Japan’s Sony and Zee Entertainment may drive concessions and extend the method by months at a essential second for the Indian firm.

An preliminary Competition Commission of India (CCI) evaluation has flagged issues, Reuters reported, arguing the group would have “unparalleled bargaining power” with 92 channels coupled with Sony’s $86 billion in international revenues.

The CCI has known as for additional investigation, highlighting the impression on competitors because of the “strong” market place the merged entity would have over promoting and channel pricing, notably within the standard Hindi language phase.

Shares in Zee fell 6% throughout commerce on Thursday, a day after Reuters reported on CCI’s evaluation of the merger.

Zee didn’t reply to questions for this text, however has stated it was persevering with to take all required authorized steps to finish the CCI approval.

Sony didn’t reply to Reuters requests for remark.

Ashok Chawla, a former CCI chairman, advised Reuters that such a evaluation may result in an in depth merger evaluation involving an examination of various broadcast choices, delaying approval.

Four antitrust legal professionals advised Reuters such a discover signalled deep CCI worries and was more likely to drive Sony and Zee to rethink their proposed construction, though none stated it was more likely to result in a collapse of the deal.

Any potential delay, nevertheless, comes at a nasty time for Zee, a family TV title in India arrange in 1992 by Subhash Chandra, dubbed the “Father of Indian Television”.

Zee’s founders needed to dilute their stake within the Indian firm to sort out their debt ranges in 2019 and the Sony deal was struck amid a 2021 boardroom battle with an abroad shareholder.

For Sony, the merger will additional its ambitions to faucet extra digital, TV and regional language audiences within the fast-growing Indian market of 1.4 billion folks.

The legal professionals stated Sony and Zee might have to supply a “structural” treatment, which may contain promoting some channels, and “behavioural” cures similar to giving commitments that they won’t increase costs for advertisers for a sure interval.

“They may have to let go of some channels by selling … to third parties. This is CCI’s preferred remedy to reduce threat to competition,” stated Shweta Dubey, a accomplice at Indian legislation agency SD Partners and a former official within the CCI’s M&A division.

“The whole approval process will be delayed significantly now, and will depend on how palatable proposed changes are to the CCI and how companies negotiate.”

REMEDY RISK

The proposed cures had been more likely to be “substantial”, one supply with direct data of the antitrust issues over the merger plan stated, with out elaborating.

In CCI’s 13-year historical past, 22 offers needed to be modified to realize approval. In 2015, for instance, when Indian multiplex large PVR Ltd sought to amass a smaller rival’s enterprise, the watchdog raised issues, forcing it to decide to promoting some theatres and provides assurances to not increase in some areas.

The CCI has given Sony and Zee 30 days from Aug. 3 to reply to its discover, however they’re but to submit their responses, stated a second supply with direct data of the method.

Analysts stated the mixed entity would reshape India’s media and leisure panorama, heating up competitors with Netflix, Amazon and Walt Disney and with Indian billionaire Mukesh Ambani’s Viacom18 three way partnership with Paramount Global.

Media corporations aren’t simply betting massive on TV channels, but in addition on their video streaming platforms and sports activities rights.

Zee this week made one other massive transfer, getting into right into a licensing take care of Disney to buy some cricket TV rights, which IIFL Securities estimates to be value $1.5 billion.

In a analysis notice, the brokerage stated these funds ought to have been made partly by the recent funds Sony deliberate to infuse into the merged entity and flagged issues over any antitrust delay.

“The biggest risk … is the merger not going through and Zee being saddled with high content costs,” IIFL stated.