Sony ends $10 billion India Zee merger, setting stage for legal spat

Japan's Sony Group scrapped plans on Monday for a $10 billion merger with India's Zee Entertainment, with both sides set to challenge each other legally over failures to close a deal that was due to reshape the country's media landscape.

The collapse of the deal intended to create a media powerhouse in content-hungry India creates more uncertainty for TV broadcaster Zee in particular at a time when competition is heating up.

Disney is now seeking to merge its Indian businesses with media assets of billionaire Mukesh Ambani's Reliance to form one of India's biggest entertainment empires.

Sony said in a statement certain "closing conditions" to the merger were not satisfied despite "good faith discussions" with Zee, and the companies were unable to agree upon an extension by their Jan. 21 deadline.

"After more than two years of negotiations, we are extremely disappointed ... We remain committed to growing our presence in this vibrant and fast-growing market," it added.

Zee told Indian stock exchanges Sony was seeking $90 million in termination fees for alleged breaches of the merger agreement and emergency interim relief by "invoking arbitration". Zee said it refutes all claims made by Sony and would take appropriate legal action.

Although Sony or Zee did not elaborate on Monday what conditions were unfulfilled, a stalemate over who will lead the combined company had put the merger in danger.

Zee had proposed that CEO Punit Goenka take the helm, but Sony balked after he became the subject of an investigation by India's market regulator. Zee said on Monday, however, that Goenka had been "agreeable to step down in the interest of the merger".

Last year, the Securities and Exchange Board of India barred Goenka from holding