Oct 9, 2020
Amazon has now sent a legal notice to Future’s group Kishore Biyani over the deal with Reliance Industries (RIL) as the group had first approached Amazon for a takeover of Future Group and citing its non-compete agreement with the Kishore Biyani-led chain. According to the notice, The future-RIL transaction cannot go ahead without Amazon’s approval in view of the non-compete clause entered earlier with the retail group
The notice seems to come as a surprise as Biyani had first approached Amazon for a takeover of the Future Group companies before defaulting to its lenders and suppliers. It was only after Amazon said no, that the Biyani group started talking to Reliance. But RIL has bought the assets and not the company.
All the same when Amazon had invested in Future Coupons last year, it had received certain rights under the contractual agreements.
The Jeff Bezos-led e-commerce giant already owns 49 percent in More – a brick and mortar supermarket chain. Samara Capital holds the rest of the equity in More. Both made an investment of $450 million in 2018 and followed up with an additional $37 million last month.
On August 29, Reliance Retail Ventures Limited (RRVL) had announced a deal to acquire the entire retail, wholesale, logistics, and warehousing businesses of the Future Group on a going concern basis for Rs 24,713 crore. Lenders, who had substantial exposure to the Future group, had supported the transaction. Post deal, Future Enterprises Ltd (FEL) — in which all Future group companies were merging — was left with consumer products business and stake in two insurance ventures.
Amazon had in December 2019 picked up a 49 percent stake in Future Coupons Ltd, a promoter entity, for Rs 1,430 crore. Future Consumer (FCL), in turn, held 7.2 percent in Future Retail Ltd (FRL). The entire proceeds were plowed back into Future Retail. But the pandemic hit Future Retail hard. Zero cash flow and multiple store closures through the first few months of the lockdown prevented the company from any recovery.
Some experts think that the legal action against Future is to ring-fence itself from shareholders who may ask questions about why they lost money in Future.
Another important thing is that when Reliance and Future entered the deal, Amazon was not kept informed. For the last few months now, Amazon has been making attempts to reach out to the Future Group without any success, so the company was left with no other choice but to serve them a legal notice as they have breached the contractual agreement.