E-Paper
RIL to acquire Future’s key businesses for Rs 24,713 crore
Reliance Retail Ventures Limited (RRVL), a subsidiary of the Mukesh Ambani-promoted Reliance Industries Limited, on Saturday announced it is the acquiring the Kishore Biyani-founded Future Group’s retail, wholesale, logistics, and warehousing businesses for Rs 24,713 crore.
Mint reported on June 11 that Reliance Retail was in advanced discussions to acquire these businesses from the debt-laden Future Group.
The all-cash deal -- it got a go-ahead on Saturday following a board meeting of Future Enterprises Limited (FEL) -- has been carried out on a “slump sale” basis, according to a media statement by RIL. It is subject to adjustments as set out in the composite scheme of arrangement, the release added. A “slump sale” is the transfer of undertakings through the sale for a lump sum amount without values being assigned to individual assets and liabilities.
As a part of the acquisition, Future Group will merge companies involved in some of the businesses listed above into FEL. The retail and wholesale undertaking of Future Group will be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly owned subsidiary of RRVL. The logistics and warehousing undertaking will be transferred to RRVL directly.
The deal will boost Reliance’s retail presence and further its e-commerce ambitions to leverage the Jio mobile phone service’s subscriber base to compete with existing market leaders Amazon and Flipkart. Reliance Retail already runs several retail formats in grocery, electronics and apparel. Some of the big Future Group retail brands that it will now control include Big Bazaar, Fashion at Big Bazaar, Easy Day, Foodhall, and Brand Factory.
“As a result of this reorganisation and transaction, Future Group will achieve a holistic solution to the challenges that have been caused by Covid and the macro economic environment. This transaction takes into account the interest of all its stakeholders including lenders, shareholders, creditors, suppliers and employees giving continuity to all its businesses”, said Kishore Biyani, the group CEO of Future Group.
Isha Ambani, director, RRVL, said in a statement issued by the company: “With this transaction, we are pleased to provide a home to the renowned formats and brands of Future Group as well as preserve its business ecosystem, which have played an important role in the evolution of modern retail in India. We hope to continue the growth momentum of the retail industry with our unique model of active collaboration with small merchants and kiranas as well as large consumer brands. We are committed to continue providing value to our consumers across the country.”
RRFLL has also proposed to invest ~1,200 crore in the preferential issue of equity shares of FEL to acquire 6.09% of post-merger equity holding; and ~400 crore in a preferential issue of equity warrants which, upon conversion and payment of balance 75% of the issue price, will result in RRFLL acquiring a further 7.05% of FEL.
FEL will, however, retain the manufacturing and distribution of FMCG goods, integrated fashion sourcing and manufacturing business, its insurance joint ventures with Generali, and joint ventures with NTC Mills.
This is not the first time that Biyani has been forced to sell off his companies to escape the debt burden. As on September 30, 2019, debt at Future Group’s listed companies increased to Rs 12,778 crore from Rs 10,951 crore as on March 31, 2019. In the 2012 fiscal, Biyani was grappling with an equally heavy debt of Rs 12,000 crore, which forced him to sell Pantaloons Retail to the Aditya Birla Group for Rs 1,600 crore. It also sold Future Capital to Warburg Pincus for Rs 4,250 crore.