Zee Demands Reimbursement from Star After ICC Rights Bid Falls Through

14 Feb 2024 , 01:14 PM

Zee Entertainment Enterprises has demanded a reimbursement of the ₹69 Crore that was paid as part of the transaction, accusing Walt Disney-owned Star India of breaking the terms of the ICC TV rights agreement.

In its Q3 financial results, Zee declared that it has solid evidence to refute Star India’s allegations about the ICC TV rights agreement. The company further stated that, in accordance with the agreement, it has incurred interest expenses and bank guarantee commission of ₹72.1 Crore for its portion of deposits and bank guarantees.

Through its legal representative, Star India has written to Zee, alleging that the network has violated the terms of the ICC TV rights agreement by failing to pay $203.5 million toward the first installment of the rights price and the required ₹17 Crore bank guarantee commission deposit. 

Zee, on the other side, claims that Star violated the agreement since it was unable to complete the required agreements and paperwork and get the required permits.

The business asserted that the agreement was subject to monetary obligations, corporate and bank guarantees, and ultimate ICC approval for the sublicensing agreement.

In its note to the financial statements, Zee stated, ‘The management believes that Star, by its conduct, has breached the Alliance Agreement and is in default of the terms thereof, and consequently, the contract stands repudiated.’

‘The company said it has communicated to Star that the alliance agreement cannot be proceeded with for the reasons set out above and has also sought a refund of ₹ 68.54 Crore paid to Star,’ it stated.

According to Zee, the contract repudiation won’t have any materially negative effects, and the accompanying statement doesn’t need to be changed.

Zee and Star India inked a deal on August 26, 2022, outlining the terms of the latter’s four-year, 2027 sublicensing of Zee’s ICC TV rights for men’s and under-19 competitions. 

It is important to remember that the Walt Disney-owned business, which is currently in merger negotiations with Viacom18 of Reliance Industries, purchased the ICC media rights for $3 billion.

Disney Star had sublicensed the ICC TV rights to Zee for $1.5 billion as part of their pre-bid agreement. In the same year that it purchased the Indian Premier League (IPL) TV rights, the firm also kept the internet rights to the cricket.

Zee, which at the time was in the process of merging with Culver Max Entertainment, the Sony Group’s India division, had obtained the rights to ICC TV because sports would have been a major area of focus for the projected Sony-Zee combined company.

It was anticipated that Sony will provide $1.5 billion in growth capital to the combined company, which would have been used for digital and sports content investments.

Sony put off the two-year-old merger last month because Zee didn’t seem to be able to achieve the closing requirements.

Due to Zee’s failure to fulfill its end of the ICC TV deal, Star will now be responsible for servicing the full $3 billion contract, which would likely negatively impact its valuation and future earnings.

The $4 billion merger agreement between Star and Viacom18 is almost ready to close. As part of its $71 billion acquisition of Rupert Murdoch’s 21st Century Fox in 2019, Disney paid upwards of $15 billion for Star.

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