Sony Group Corp. has officially communicated to Zee Entertainment Enterprises Ltd. its decision to cancel the merger with its India unit.

In a formal termination letter sent early on Monday, Sony cited unmet conditions as the primary reason for ending the merger with Zee. The Japanese entertainment giant is expected to disclose this development to the exchange later.

In a statement, Sony explained, “The Merger did not close by the End Date as, among other things, the closing conditions to the Merger were not satisfied by then. Sony Pictures Networks India Private Ltd (SPNI) has been engaged in discussions in good faith to extend the End Date, but the Discussion Period has expired without an agreement upon an extension of the End Date. As a result, on January 22, 2024, SPNI issued a notice to ZEEL terminating the definitive agreements."

The merger, initially announced over two years ago, faced challenges, particularly related to the leadership of the combined entity. These challenges were further exacerbated by the Securities and Exchange Board of India (SEBI) probe into Zee chief executive officer Punit Goenka.

The termination of the $10 billion merger deal with Zee is attributed to a deadlock between the companies concerning the leadership of the merged entity, especially involving Zee's CEO Punit Goenka. Goenka is currently under investigation by the capital markets regulator SEBI. This impasse has effectively derailed the deal, which aimed to establish a $10 billion media powerhouse capable of competing with global giants like Netflix Inc. and Amazon.com Inc.

Sony's termination letter comes after the expiration of a 30-day grace period over the weekend, during which the two parties failed to reach an agreement on a deadline set in late December.

In June, SEBI accused the Mumbai-based media house of fabricating the recovery of loans to conceal private financing deals by its founder, Subhash Chandra. Although Goenka obtained relief from an appellate authority against the SEBI order, which barred him from holding an executive or director position in a listed company, Sony continued to perceive the ongoing probe as a looming corporate governance concern.