View: Sony’s spurned target shows the pitfalls of tempting Indian M&A
Sony Group Corp. dodged a bullet when its lawyers nixed a $10 billion Indian merger that executives had spent two years trying to bring to fruition. The spurned target hasn’t been as lucky. Zee Entertainment Enterprises Ltd. has no other suitors on the horizon, and its founders’ mounting legal troubles are threatening to engulf the firm.
To foreign investors, the Sony-Zee saga is a reminder of the need to approach Indian deals with an abundance of caution. In 2008, Daiichi Sankyo Co. shelled out $4.6 billion to buy Ranbaxy Laboratories Ltd., a generic drugmaker, from New Delhi-based brothers Malvinder Singh and Shivinder Singh. Shortly after, US regulators barred more than 30 drugs made at two of the Indian company's plants and halted reviews of new products at one of the factories because the firm had falsified data. Daiichi got pulled into a rabbit hole to win an arbitration award against the brothers for suppressing facts, and then to get it enforced.
Sixteen years later, governance at many Indian family-controlled firms isn’t any better. The market watchdog, which is investigating Zee’s founder Subhash Chandra and his son Punit Goenka, the chief executive officer, for siphoning funds from the publicly traded firm, has found a 20 billion rupee ($241 million) diversion, roughly 10 times bigger than what was revealed to a preliminary probe.
The near-15% slump in shares that followed the Bloomberg News report — denied by the company as “incorrect, baseless and false” — puts the onus on the father-son duo. They
