Reliance Retail to buy Future group's retail business for Rs 24,713 cr

Future group's brands include Big Bazaar, Easyday, Nilgiris, Central and Brand Factory

Reliance Retail Ventures Limited (RRVL), a subsidiary of Mukesh Ambani-owned Reliance Industries Ltd, today announced that it is acquiring the entire retail, wholesale, logistics and warehousing businesses from the Future Group as a going concern basis for a total consideration of Rs 24,713 crore.

While the widely anticipated acquisition means exit of Kishore Biyani, the “retail king” of India and founder of Future group from the industry after close to three decades, it will consolidate Ambani’s position in the Indian retail industry which is witnessing huge investments by multinational players in the e-commerce segment such as Amazon and Walmart. The merger also means increased competition to existing brick and mortar companies like D-Mart and Aditya Birla Fashion.

The merger will help Biyani to get rid of debt – both at the promoter level and in the listed entities level which were hit hard by the Corona pandemic – resulting in the closure of several stores since March.

In a statement, Reliance said the acquisition is being done as part of the merger scheme in which Future Group is merging certain companies carrying on the retail businesses into Future Enterprises Limited (FEL). As per the plan, various Future group companies such as Future Retail Limited, Future Consumers Limited, Future Supply Chain Solutions Limited Future Lifestyle Fashion Limited, Future Brands Limited and Future Market Network Limited will first merge into Future Enterprises Limited.

Subsequently, the retail and wholesale undertaking will be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL. At the same time, the logistics and warehousing undertaking will be transferred to RVVL.

In return, RRFLL proposes to invest Rs 1,200 crore in the preferential issue of equity shares of FEL to acquire 6.09 per cent of post-merger equity. It will invest another 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.

RRFLL and RRVL will also take over certain borrowings and current liabilities and discharge the balance consideration by cash. The identified assets and Identified liabilities of the retail and wholesale undertaking would be transferred to Reliance Retail and Fashion Lifestyle Ltd as a going concern on a slump sale basis for a consideration of Rs. 5,628.33 crore. The retail and wholesale business includes Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory.  

As per the merger plan, Future Enterprises  will issue 9 shares of FEL for every 10 shares held in Future Consumer. FEL will also issue 116 shares for every 10 shares in FLFL while 10 shares of Future Retail will fetch 101 shares in FEL. The shareholders of Future Supply Chain holding 10 shares will get 131 shares in FEL. FEL will also issue 18 fully paid up equity shares of Rs 2 each to the equity shareholders of FMNL for every 10 fully paid up shares of Rs 10 each held.

"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,” Isha Ambani, Director of Reliance Retail said.

“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," she added.

RIL said the acquisition of the retail, wholesale and supply chain business of the Future Group complements and makes a strong strategic fit into Reliance’s retail business. This will help Reliance retail to accelerate providing support to millions of small merchants in increasing their competitiveness and enhance their income during these challenging times, the RIL statement said.

RRVL is a subsidiary of Reliance Industries Limited, carrying on the consumer supply chain business and consumer retail Business through its subsidiaries. RRVL reported a consolidated Turnover of Rs 162,936 crore and net profit of Rs 5,448 crore for the year ended March 31, 2020.

“Aa a result of this reorganisation and transaction, the Future Group will achieve a holistic solution to the challenges that have been caused by Covid-19 pandemic and the macro-economic environment,” said Kishore Biyani, Group CEO, Future Group.

“This transaction takes into account the interest of all the stakeholders including lenders, shareholders, creditors, suppliers and employee giving continuity to all its businesses,” said Biyani.  

Post transaction, FEL will retain few manufacturing and distrbution of FMCG goods apart from its insurance JVs with Generali and JVs with NTC Mills.        

       

Win-Win deal

• Reliance Retail Ven to buy Retail, Wholesale, Logistics business of Future Group
• RIL unit to buy businesses for Rs 24,713 crore
• Deal to be done via slump sale basis
• RIL unit to buy Rs 1,200 crores worth of shares in FEL via pref issue
• RIL units to invest another Rs 400 cr in preferential issue of FEL
• RIL to take over part of Future group’s liabilities

 

THE MERGER PLAN:

• Future Enterprises to merge listed Future cos with self
• FEL to issue 9 shares for every 10 shares in Future Consumer
• FEL to issue 116 shares for every 10 shares in FLFL
• 10 shares of FRL to fetch 101 shares in FEL
• Future Supply Chain 10 shares to get 131 shares in FEL
• FEL will issue 18 fully paid up equity shares of Rs 2 each to the equity shareholders of FMNL for every 10 shares of Rs 10 each held