Reliance Retail Future Group Deal In Trouble After Supreme Court Rules in Favour of Amazon

In a major blow to Reliance Retail and Future Group, the Supreme Court of India has ruled its decision in favour of e-commerce giant Amazon. Amazon had opposed the deal between Future Group and Reliance as last year, Amazon had bought 49 percent stake in one of Future Group’s unlisted firms, with the right to buy into the listed flagship Future Retail Ltd. Amazon had claimed that its contract with the unlisted Future Coupons Ltd barred a transaction with a number of persons and companies, including Reliance.

The top court has now stated that that the Emergency Award passed by Singapore arbitrator stalling Future Group and-Reliance deal is enforceable in Indian law. Reliance Retail Ventures Limited (RRVL), subsidiary of Reliance Industries Limited, had announced last year that it is acquiring the Retail & Wholesale and Logistics & Warehousing Business from the Future Group as going concerns on a slump sale basis for lumpsum aggregate consideration of Rs 24,713 crore, subject to adjustments as set-out in the composite scheme of arrangement.

The acquisition was supposed to be done as part of the Scheme in which Future Group is merging certain companies carrying on the aforesaid businesses into Future Enterprises Limited (FEL). As a part of the same Scheme the following initiatives were to take place:

• The Retail & Wholesale Undertaking was to be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL;
• The Logistics & Warehousing Undertaking was to be transferred to RRVL; and
• RRFLL also proposes was to invest Rs 1,200 crore in the preferential issue of equity shares of FEL to acquire 6.09 % of post-merger equity; and Rs 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 further 7.05% of FEL.

The Competition Commission of India (CCI) had also approved the acquisition by Reliance Retail of the retail and wholesale undertaking and the logistics and warehousing undertaking of the Future Group under Section 31(1) of the Competition Act, 2002. “The Transferor Companies consists of several listed and unlisted companies, primarily engaged in retail, wholesale, logistics and warehousing businesses. These businesses operate on a pan-India basis, and include retail operations across segments such as food and grocery, apparel, footwear and accessories, other merchandise, etc,” the notice from CCI had said.