Process M&A application, ignore Amazon letter, Future Retail urges bourses

Statement comes after Amazon wrote to Sebi and stock exchanges last week on Singapore arbitrator's stay order

Future Retail has asked the BSE and NSE to process its application for merger and acquisition of its retail assets by Reliance Industries (RIL). 

The statement — released to the bourses on Sunday — comes after Amazon wrote to the Securities and Exchange Board of India (Sebi) and the exchanges last week, requesting them to consider the Singapore arbitrator’s interim judgment, which has put on hold the Rs 24,713-crore deal between Future Group and RIL. 

Future has urged the exchanges to not take into cognisance Amazon’s letter or the emergency arbitrator’s order, calling it entirely “misconceived”. 

Future Retail has argued in its statement that Amazon’s contention, pertaining to alleged violation of a non-compete clause in a 2019 agreement between a Future promoter entity (Future Coupons) and the e-tailer, was incorrect. The agreement had given Amazon an indirect stake of 5 per cent in Future Retail. 

“If the two separate 2019 agreements (between Amazon and Future Coupons, and Future Retail and its promoters) were treated as a single integrated transaction by which Amazon obtained an interest in and rights against Future Retail, then in 2019 when the agreements were executed, there would have been a change in control of Future Retail in favour of Amazon, requiring it to make an open offer to Future Retail’s public shareholders according to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. No such open offer was made, thereby suggesting there was no intent by Amazon to consider the two agreements as a single integrated transaction at that point of time,” the company said.

Future Retail also noted that Amazon’s claims were at best a “contractual dispute” between the e-tailer and its promoters, and that the e-tailer had already initiated arbitration for the same as well as sought damages of Rs 1,431 crore, along with interest. 

“It is submitted that Sebi and the stock exchanges should consider the scheme of arrangement independently on its merit, and according to Sebi regulations. A contractual dispute between the promoters of Future Retail and Amazon cannot restrict or interfere with the authority of Sebi and the exchanges to approve of the scheme involving the listed entity. To be clear, the emergency arbitrator’s order cannot and does not, in any manner, restrict Sebi or the exchanges from considering and approving of the scheme,” it said. Future Retail had already said in its statement on October 26 that actions taken by the company and its board could not be held back in arbitration proceedings to which it is wasn’t a party. 

“This order will have to be tested under the provisions of the Indian Arbitration Act in an appropriate forum,” the company said. 

Legal experts and analysts had told Business Standard that Future Group and Amazon would have to seek an out-of-court settlement.  “Amazon has gone to court to expedite the issue it has with Fut­ure Group. A delay in the transaction is something Future and Reliance cannot afford. This may push them to reach a settlement with Amazon, and consent ter­ms could be filed in court,” said H P Ranina, a corporate lawyer. Abhimanyu Sofat, head (research) at IIFL Securities, sai­d both Future and Amazon had legal points in their favour regarding the dispute.

“It is better for the two to settle the dispute amicably. Amazon’s investment is zero, given that Future Group is laden with debt. The latter is unable to continue operating without help from a third party, which is Reliance,” he said.