By Arpan Chaturvedi and Aditya Kalra

NEW DELHI (Reuters) -Sony and Zee disagreed over greater than 20 compliance points, together with the Indian agency’s failure to eliminate some Russian belongings and its $1.4 billion Disney cricket rights deal, earlier than their India merger was scrapped, based on inner emails reviewed by Reuters.

The communications between Sony (NYSE:)’s authorized and M&A executives in India and Los Angeles with high Zee executives present undisclosed particulars on the high-stakes backroom tussle that preceded the Japanese agency’s Jan. 22 resolution to drag the plug on the $10 billion merger.

Emails exchanged between Dec. 20 and Jan. 9 present executives from each corporations accusing one another of not honouring the merger commitments. Zee executives repeatedly mentioned that there was nothing out of line, and requested Sony to increase the closure deadline.

“A variety of occasions, circumstances, state of information, circumstances have occurred, which have, or are fairly more likely to have a ‘materials adversarial impact’ on the enterprise, operations,” Drew Shearer, a high Los Angeles-based Sony government wrote in an electronic mail.

Every week later, on Dec. 27, Zee’s high India counsel Shyamala Venkatachalam accused Sony of making an attempt to “depict a story which has no foundation in information”, saying Zee was dismayed by what it known as was a “sudden volte face” from the corporate in dangerous religion.

Spokespersons for Zee and Sony declined to remark.

The Zee-Sony merger, within the works for 2 years, would have created an Indian TV juggernaut with greater than 90 channels throughout sports activities, leisure and information that will have competed with the likes of Walt Disney (NYSE:) and billionaire Mukesh Ambani’s Reliance.

The collapse of the deal is an even bigger setback for Zee, certainly one of India’s finest identified TV networks that began in 1992 however has seen its enterprise wrestle through the years. Its shares have fallen 27% because the merger was known as off.

Shriram Subramanian, founding father of proxy advisory agency InGovern which advocates for investor rights, mentioned mutual funds and different traders who personal 96% of Zee stay clueless as to why the merger collapsed, as the corporate has not disclosed any particulars. “Buyers should know what went on behind scenes,” he mentioned.

Emails present there was a face-off between Sony and Zee about 4 Russian subsidiaries that dealt in content material creation and distribution, because the merger settlement had stipulated no dealings with entities based mostly in nations beneath U.S. sanctions. Russia is beneath Western sanctions for the Ukraine conflict.

In a Jan. 5 electronic mail, Erik Moreno, government vice chairman for company improvement and M&A at Sony Photos Leisure mentioned Zee had not ended ties with the Russian entities despite the fact that it was “completely important”, and the merged entity “would on no account inherit the Russian entities”.

Zee’s counsel Venkatachalam responded by saying the divestment course of had not been accomplished because of altering rules in Russia and alternate buildings had been being explored, despite the fact that the enterprise of these entities “was shut down in December 2022”, emails confirmed.

DISNEY DEAL, SMALL LOAN

Reuters on Monday reported Sony’s confidential termination discover which confirmed it accused Zee of additionally not assembly sure monetary phrases together with required money reserves. Zee denies these allegations.

The emails present one other key sticking level was Zee’s 2022 resolution to enter right into a $1.4 billion take care of Disney to buy sure TV cricket rights for India.

Sony mentioned Zee had determined to furnish a financial institution assure and a deposit totaling $406 million for that deal. And Zee’s bid to take debt for the deal, which was “with out prior written consent” of Sony, took the Indian agency’s whole debt to greater than $451 million – above the merger settlement threshold.

Moreno wrote mentioned within the Jan. 5 electronic mail that Sony had a number of instances “raised our issues and reservations in relation to the (Disney) alliance settlement … together with, in respect of the consideration agreed to be paid”.

In response, Zee authorized government mentioned that Sony’s allegations had been raised too late, and had been “reprehensible and unlucky”. The cricket deal violated no merger circumstances as the 2 sides wished to encourage Zee’s growth into sports activities, it argued within the emails.

Reuters has reported that Zee has determined to terminate its cricket take care of Disney because of lack of funds.

Except for the Disney deal, Sony accused Zee of a number of different merger settlement breaches, the emails present, together with launching a brand new channel in South Africa throughout talks and granting a $3.3 million mortgage to an affiliate in India with out specifying compensation time period.

Zee mentioned none of these issues breached the deal phrases. “Now we have borne nice prices to make sure a profitable merger between our corporations,” Zee’s Venkatachalam wrote in an electronic mail.