The Zee-Sony deal was doomed from the start

The proposed merger was odd, with its majority owner not assuming executive control. An agency problem' risk of leadership and ownership interests going out of whack was averted

Sony's decision to terminate the planned merger of its Indian entertainment unit with Zee opens India's TV broadcast sector up for fresh deal activity even as the two companies look set for a legal battle. Sony, in its letter of termination, alleged a failure by Zee to meet their pact's conditions and has sought $90 million from it in damages. While the Japanese business hasn't specified any violation, its broad discomfort seems to stem from Zee founder Subhash Chandra's son Punit Goenka staying on as CEO of the merged entity. To be sure, this arrangement was part of the original deal struck more than two years ago. But the context has transformed since then. The Securities and Exchange Board of India began probing the father-son duo on charges of funds whisked away from the Zee group's publicly listed firms, barring them from trading securities and board seats, although these bans were later lifted. The allegations remain unproven, but the shadow cast by them made Sony wary of an entity it owned facing regulatory action at some point.