Reliance and Future Group

RELIANCE AND FUTURE GROUP DEAL
DEAL OVERVIEW TIME LINE

• In August 2020, Reliance retail announced that it is going to acquire debt laden • December 2019 : Amazon buys 49% stakes in future coupons
Future Group’s retail, wholesale, logistics and warehousing business. • August 2020 : Reliance retail finalizes deal with Future group.
• September 2020 : Amazon files case in Singapore International Arbitration
• The deal is fixed for Rs 24,713 crore. Reliance retail also decided to invest Centre.
1,200 crore in the equity share of FEL to acquire 6.09% of post merger equity • October 2020 : Amazon won the case in Singapore International Arbitration
holding. center. The center puts stay on Reliance – Future First deal.
• November 2020 : Future group goes to Delhi High court to appeal against
• However Amazon who has 2% stock in future first opposes the acquisition and the mandate given by Singapore Arbitration center.
appeals against it in Singapore International Arbitration Centre. • March 2021 : Delhi high court gives decision in favor of Amazon and puts a
stay on the deal.
• Amazon won the case in Singapore but Reliance and Future group moves on • March 2021 : Future groups files a review petition in Delhi High Court.
with the deal as international tribunal laws are not applicable in India according • March 2021 : A two judge bench puts stay on the previous order given by
to the court.
• Future First appeals in Delhi high court against the SIAC ruling. . Amazon also • April 2021 : Amazon appeals against the Delhi high court judgment in
appealed against Future First and a single judge bench puts the deal on hold supreme court.
• However a two judge bench stayed the order of single judge bench and allows • Next date of hearing in supreme court : 20 th July 2021.
the deal to take place.
• Amazon appeals against it in Supreme court where case is still going on.
Corporate Risk : On an overall basis by
Both the companies can take acquiring Future group, Reliance retail is
huge advantage of the going to reduce its overall corporate risk.
marketing and advertising
capability of the respective Tax Advantages : Reliance retail can make use
companies. Reliance as a of losses of Future group to offset its overall Supply Chain Efficiencies : Reliance can make use of enhanced supply chain
bigger brand can extend its profit and hence can reduce the overall tax of Future first to enhance its revenue. The distribution network of future
marketing capability by liabilities. group is much better as compared to reliance retail.
making use of Future group.
Establishment of internal capital market : On Lower Salaries and Wages : When Reliance acquires Future first then they
an overall basis reliance will reduce its overall can get rid of excess employees or managers in the company, which in turn
financial costs and increase its financial results in lower salaries or wages which the company need to give.
flexibility and can easily pay the creditors of
Future group. Complementary Customers : The merger will overall lead to a rise in
customer base of the final company as customers from both reliance retail
Despite a price tag of around USD 3.3 billion, and big bazar comes into one single group.
the cost of the acquisition remains small
relative to RIL's total assets of around USD Efficient Distribution Network : Reliance can make use of wide network of
155 billion and consolidated EBITDA of USD retail stores of future first in various cities in order to increase its overall
12.8 billion holdings for various products and to distribute products efficiently.
Reliance can make use of Big
Bazaar's infrastructure to
improve its revenue , overall
making it better than their
individual revenue.
RESTRICTIONS
• In 2019, Amazon buys 49 percent stake in future coupons in a worth nearly 2000 crore.
• According to the deal, Future retails could be able to place their products on Amazon’s online market place.
• The deal also gives Amazon a call option which enabled it to exercise the option of acquiring all or part of Future Coupon’s promoter, Future Retail’s
shareholding in the company, within 3-10 years of the agreement.
• After Future’s agreement with Reliance, Amazon said the deal was a violation of a non-compete clause and a right-of-first-refusal pact it had signed with
the Future Group.
• The deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.
• Amazon moves to Singapore Arbitration court and won the case over there. In response to this Future group files the case against Amazon in Delhi High
Court. . Amazon also appealed against Future First and a single judge bench puts the deal on hold.
• A two judge bench later puts the decision on hold. Amazon appeals against it in supreme court. The next hearing of supreme court is scheduled on July
20.
• The deal has already received clearance from regulators such as CCI, SEBI and bourses, and the scheme of arrangement is now awaiting the nod from the
NCLT and shareholders.
• The Supreme Court has granted a go-ahead to the National Company Law Tribunal (NCLT) for its proceedings but has asked it not to pass any final order
sanctioning the scheme.
IF DEAL TAKES PLACE
RELIANCE INDUSTRIES FUTURE FIRST GROUP

• Good penetration into Indian retail sector. • Future group could be able to give back money to their lenders.
• Good Infrastructure of retail stores across different cities which Future • The group could be able to save itself from liquidation.
group holds currently.
• Jobs of a million employees could be saved.
• Overall benefit through various synergies discussed earlier.
• It can rule over the Indian retail sector with the only rival D Mart left.
IF DEAL DOSEN’T TAKE PLACE DUE TO AMAZON
FUTURE FIRST GROUP

RELIANCE INDUSTRIES
• It will lead to its liquidation.
• It would be a major setback for reliance retail.
• Job losses.
• Reliance need to come up with another strategy so as
to gain an upper edge in Indian retail sector. • Closing of all of its retail stores and distribution
centers.
SOURCES
Web links
• https://www.financialexpress.com/market/reliance-industries-rating-hold-deal-for-future-group-highly-synergistic/2070909/
• https://
www.livemint.com/companies/news/with-reliance-deal-in-lurch-future-group-looks-to-recover-2-5-billion-loans-11613463215944.html
• https://www.indiatoday.in/business/story/reliance-future-deal-what-s-at-stake-1757947-2021-01-11
• https://indianexpress.com/article/explained/explained-why-future-group-has-taken-amazon-to-court-what-the-court-said-7113612/
• https://
www.business-standard.com/article/companies/reliance-retail-extends-deadline-to-complete-rs-24-713-cr-deal-with-future-121040200288_1.
html
• https://corporatefinanceinstitute.com/resources/knowledge/deals/synergistic/
• https://corporatefinanceinstitute.com/resources/knowledge/valuation/types-of-synergies/
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RELIANCE AND FUTURE GROUP DEAL

DEAL OVERVIEW TIME LINE

RELIANCE INDUSTRIES FUTURE FIRST GROUP

IF DEAL DOSEN’T TAKE PLACE DUE TO AMAZON

FUTURE FIRST GROUP

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