Mukesh Ambani led Reliance Industries subsidiary Reliance Retail Ventures Limited (RRVL) on Sunday (August 30,2020) announced to acquire the Retail & Wholesale Business and the Logistics & Warehousing Business from the Future Group, the owner of the largest retail chain Big Bazaar and in-house brand FBB, for Rs 24,713 crores.
The acquisition has been done as part of the scheme in which Future Group is merging certain companies carrying on the aforesaid businesses into Future Enterprises Limited (FEL).
Future Enterprises will subsequently sell by way of a slump sale the retail and wholesale business such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of Reliance Retail Ventures Limited (RRVL).
As a result of this reorganization and transaction, Future Group will achieve a holistic solution to the challenges that have been caused by COVID and the macroeconomic 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, Group CEO, Future Group.
RRFLL has also proposed to invest 1,200 crores in the preferential issue of equity shares of FEL to acquire 6.09 % of post-merger equity holding; and 400 crores 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.
According to a study by Boston Consulting Group and Retailers Association India. the Reliance Retail Future Group deal is going to boost the nations largest retailer in a sector thats estimated to be worth $1.3 trillion by 2025 from $700 billion in 2019. Moreover, it will also help the indebted FEL.
Reliance has also asked Future Groups vendors to take a haircut of around 40% on their past dues. Some of the top Indian FMCG companies, including ITC and HUL, are suppliers to Future Groups retail stores.
While expressing pleasure over the merger deal with the Reliance groups, Biyani said, These businesses will further benefit from a supply agreement with RRFLL. This deal will also enable FEL to focus on the creation of new-age brands in the FMCG and fashion space and expand its reach. The transaction will help FEL to expand with a focussed business model and a stronger balance sheet.
Reliance Retail Ventures Limited Director, Isha Ambani said, "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."
This deal is expected as a breakthrough move in competition with Amazon.com Inc. as well as Walmart Inc.
