Reliance Cancels Plan To Acquire Big Bazaar, Future Group For Rs 24,000 Crore: Find Out Why? What Next?

On Saturday, Reliance Industries Ltd said that it cannot go forward with the a Rs 24,713-crore deal with Kishore Biyani-led Future Group to acquire its retail, wholesale, logistics and warehousing assets which it signed 21 months before after signing an agreement. Reliance has cited that the secured creditors of FRL have voted against the same.

In a regulatory filing, Reliance said Future Group companies comprising Future Retail Limited (FRL) and other listed companies involved in the scheme have intimated the results of the voting on the scheme of arrangement by their shareholders and creditors at their respective meetings.

While updating on the scheme of arrangement for the transfer of retail and wholesale business and the logistics and warehousing business of Future Group to its subsidiary Reliance Retail Ventures Ltd (RRVL) and Reliance Retail and Fashion Lifestyle Ltd (RRFLL), Reliance said that “… The secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented”.

A meeting of the their shareholders, secured and unsecured creditors of Future Group companies was held this week to seek their approval for the scheme which details the amalgamation and sale of assets as per the deal announced with Reliance Retail.

Secured Creditors Voted Against

However, the secured creditors– could not get the mandatory 75 per cent approval. The secured creditors here are the banks and financial institutions, of listed entities – Future Retail, Future Enterprises, Future Lifestyle Fashion Ltd, Future Market Networks and Future Consumer.

However, the shareholders of the listed entities had supported the deal with Reliance.

Amazon opposed to the meetings. For the unaware, Amazon in 2019 picked up a 49 per cent stake in Future Coupons Pvt Ltd (FCPL), a promoter firm of FRL.

It was announced in August 2020 by Future Group that it has signed a ?24,713-crore deal to sell 19 companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures Ltd (RRVL), which is a holding company of all the retail companies under the RIL Group.

Amazon vehemently opposed to the deal on the grounds that the deal violated its 2019 agreement through which it acquired a 49 per cent stake in FCPL, the promoter entity of FRL, for about ?1,500 crore.

There were no comments over this cancellation of the deal from Future Group, Reliance Retail and e-commerce major Amazon.

After the Kishore Biyani-led group failed to make lease payments to landlords, it was Reliance Retail that had taken over the operations of at least 350 stores of FRL and offered jobs to its employees.

Amazon had dragged FRL and promoters to the Singapore International Arbitration Center (SIAC), where an interim award was passed by the EA (the emergency arbitrator) in October 2020, in favour of Amazon. It had barred FRL from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.

Following this, a string of litigations started before the Delhi High Court, Supreme Court and NCLT, forcing the RRVL to extend the long-stop date for the Scheme three times. Last month, it extended the date for another six months to September 30, 2022.

19 companies of the Future Group were proposed to be consolidated into one entity — Future Enterprises Ltd (FEL) — and then transferred to RRVL as per the scheme between the two.

Details Of The Voting

On Friday, 99.97 per cent of FEL’s secured creditors have opposed the scheme. Notably, 99.99 per cent shareholders had supported the deal.

When it comes to the unsecured creditors, 62.65 % were in favour of the deal, while 37.34% were against.

Only Future Supply Chain Solutions Ltd got the mandatory 75 per cent voting in favour of the scheme. Rest all, which include all listed Future group entities including – Future Retail, Future Lifestyle Fashion Ltd, Future Market Networks and Future Consumer, failed to get the numbers.

100% of secured creditors of Future Consumer and Future Market Networks have voted against the deal.

The flagship firm of Future group, FRL in its regulatory filing said that 69.29 per cent of secured creditors voted against the deal while 30.71 per cent voted in favour of it.

Around 85.94 per cent shareholders of FRL voted in favour of the deal with Reliance, while 14.06 per cent shareholders opposed it.

Section 230 (6) of the Companies Act, 2013 mandates in the meeting of creditors or members (shareholders), the scheme of arrangement as sanctioned by the National Company Law Tribunal (NCLT), should be approved by the “majority of persons representing three-fourths in value”.

Besides, the fate of FRL board and management is uncertain as the company also faces a plea to initiate insolvency proceedings before the NCLT.

Last week, public sector lender Bank of India moved the Mumbai bench of NCLT seeking insolvency proceedings and to declare a moratorium over the assets.