Amid Zee-Sony Merger Delays, Sony Explores Acquisition of Disney's India Business

Amid delays in the Zee Entertainment Enterprises and Sony Pictures Entertainment (SPE) merger, Sony has initiated preliminary discussions with Walt Disney Co. regarding the potential acquisition of Disney's India business. This move is seen as a contingency plan should the ongoing merger with Zee face further delays or not materialize, given that it has been in progress for nearly two years.

The Zee-Sony merger received National Company Law Tribunal (NCLT) approval on August 10, without any conditions. Subsequently, the companies have been working on finalizing the merger's conditions, with expectations that the merged entity could be listed by December. However, if the merger is postponed beyond December, Sony may accelerate talks with Disney, according to Karan Taurani, Vice President at Elara Capital.

Elara Capital reports that Sony is seeking a strategic partner for its India and global TV business. Nevertheless, the Disney-Sony deal may face obstacles due to a substantial overlap in their target audiences, particularly urban viewers. Regulatory approvals, such as those from the Competition Commission of India (CCI) and NCLT, may take over a year and could pose challenges, especially given the combined TV ad market share of 45% that a Sony-Disney entity would hold (as opposed to the 25% of Zee-Sony).

Elara Capital also suggests that Sony may need to commit a significant amount of capital to acquire Disney, as Disney India's valuations are estimated to be in the range of $4-6 billion (for linear TV only) and $10-11 billion (including linear TV and Hotstar). The successful completion of the Zee-Sony merger is crucial for Zee's valuation, and Sony is unlikely to pursue the Disney acquisition unless the merger faces further delays.