Future, Bharti to combine retail biz; Biyani to have control

Kishore Biyani-led Future group today agreed to merge its retail business with rival Bharti Retail in an all-stock deal worth Rs 750 crore to create one of the biggest supermarket chains with Rs 15,000 crore turnover.
This is the second major consolidation exercise within two days in the fast-growing Indian retail sector, after Aditya Birla Group yesterday announced merging all its apparel retail businesses into a single entity.
The two-tier deal between Future and Bharti groups also involves merger of their respective retail infrastructure business into Future Retail -- creating two separate companies for the front-end retail and infrastructure activities.

Future Group promoters would hold 46-47 per cent stake in each of the two companies, while Bharti Retail will have about 15 per cent holding in each of them.
As part of the deal, Bharti Retail will get shares worth Rs 500 crore immediately, while shares worth another Rs 250 crore would be converted at a later date.
"We are merging our retail businesses to create two separate companies ... The combined retail entity will have a total turnover of Rs 15,000 crore," Future Group CEO Kishore Biyani told reporters here.

Bharti will have one member on each of the two new companies. The new retail entity will have one of the largest networks in India with 570 stores across 243 cities.

Bharti's Easyday chain of stores and Future's Big Bazaar stores will continue to operate, Biyani said.
Stating that Bharti is not exiting from retail business, Bharti Enterprise Vice Chairman Rajan Bharti Mittal said: "We are only merging. This was needed for faster growth. It is a strategic fit for both the companies."
Earlier in 2013, Bharti and global giant Wal-Mart had terminated their partnership, including a franchise agreement in retail business, pursuant to which the US-based retailer acquired full control of their wholesale cash and carry business joint venture.
While policy allows for 51 per cent FDI in multi-brand retail sector, the foreign retailers have been cold to set up shops in India due to political backlash.

The Future-Bharti deal comes a day after Birla Group merged its apparel businesses into a Rs 5,290 crore entity named Aditya Birla Fashion and Retail (ABFRL), which will be the largest pure-play fashion lifestyle company in India.