Reliance Industries Ltd (RIL) told the stock markets on April 23 that it could not complete the $3.4 billion plan to take over the retail assets of Future retail Ltd (FRL) because the Company’s shareholders and members “voted against the scheme.”
The purchase of Kishore Biyani-backed retail, logistics, and storage businesses by Reliance Industries (RIL) was called off on Saturday. The news follows the rejection of RIL – Future Group’s plan of disposition by creditors yesterday.
RIL updated the scheme of disposition for the transfer of Future Group’s retail & wholesale business, as well as its logistics and warehousing business, to Reliance Retail Ventures Limited (RRVL), a subsidiary of the Company, and Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL, in a regulatory filing today.
“The Future Group businesses, which include Future Retail Limited (FRL) and other listed firms engaged in the plan, have informed their shareholders and creditors of the results of the scheme of disposition vote at their respective meetings,” RIL stated.
RIL went on to say, “According to these findings, FRL’s shareholders and unsecured creditors voted in support of the plan. The promoters of FRL, on the other hand, voted against the plan.”
“As a result,” RIL added, “the subject plan of the agreement cannot be executed.”
Kishore Biyani’s Group is now embroiled in a long-running spat with e-commerce behemoth Amazon, fighting the former’s 24.713 crore agreement with Mukesh Ambani’s retail arm.
The reason for the termination of the RIL-Future deal.
FRL is the leading firm of the Future Group, which includes Big Bazaar, Foodhall, Easyday Club, WH Smith, and other well-known retail brands. In August 2020, Future Group agreed to sell 19 of its Retail, wholesale, logistics, and warehousing firms to Reliance Retail Ventures Ltd. (“RRVL”), a subsidiary of Reliance Industries Limited, for a total of Rs. 24,713 crores.
All of these businesses were to be merged into one Company called Future Enterprises Limited. FRL was granted permission to host its Shareholder’s Meeting by the National Company Law Tribunal, Mumbai Bench, in a judgement dated February 28, 2022. As a result, FRL called a Shareholder’s Meeting from April 20 to April 23, 2022, to seek approval from its shareholders for its plan of disposition with Reliance.
On Friday, most shareholders voted against approving Future Group’s Rs 24,713 crore plan to sell most of its retail and logistics assets to Reliance Retail.
Future Lifestyle shareholders voted against the plan by 82.75 per cent. Shareholders voted 81.91 per cent in favour, while unsecured creditors voted 93.93 per cent in favour.
In Future Retail, 69.29% of promoters voted against the resolution, while 85.94% of shareholders favoured the merger plan. In Future Retail, 69.29% of promoters voted against the resolution, while 78.22% of unsecured creditors favoured the scheme.
The disposition was approved by 81.63 per cent of promotors in Future Supply Chains.
In the case of Future Consumer, none of the Company’s shareholders voted in favour of the resolution, but 99.86 per cent of shareholders voted in favour of the merger plan, and 77.4 per cent of the Company’s unsecured creditors voted in favour of the scheme.
The program was approved by 100% of the shareholders of Future Enterprises. 100% of secured shareholders voted against the plan, while 62.7 per cent of unsecured creditors voted yes.
Following a Supreme Court judgment on February 28, the National Company Law Tribunal (NCLT) ordered Future Group to summon a meeting of shareholders and creditors to seek permission for sale to Reliance Retail for Rs 24,713 crore.
On Tuesday and Wednesday, promoters, secured and unsecured creditors of the six publicly traded Future Group firms voted. Bankers had previously informed sources that all significant lenders had rejected the plan.
Future Retail has been sent to NCLT for resolution under the Insolvency and Bankruptcy Code by the public sector lender Bank of India (BoI).
The NCLT has been petitioned by BoI, the main bank in the consortium of lenders to Future Retail, to resolve the issue. The banks’ exposure is believed to be over Rs 17,000 crore.
BoI issued an early notification of bringing an application under Section 7 of the IBC 2016 against Future Retail, according to the Company’s exchange filings. This is for failure to pay under the provisions of the framework deal between the two parties.
In its exchange filing, FRL said, “We have received a copy of the petition and are in the process of seeking legal assistance.”
The application is anticipated to be heard by the NCLT’s Mumbai Bench. There is no set date for this.
Previously, Amazon group claimed that these shareholders and other meetings violated their prior deal with Future Group, which Future Group said complied with the NCLT ruling.
Future Retail would sell 19 firms in the Retail, wholesale, transportation, and warehousing areas to Reliance Retail Ventures as part of the Rs 24,713-crore agreement announced by Future Group in August 2020.
Amazon’s stance on the Future-Reliance agreement
The meetings of the Future Group of firms to ratify the Reliance purchase were met with opposition from Amazon Inc. Amazon and Future Retail have been locked in a protracted court struggle. Amazon opposes the Future-Reliance sale because it violated its 2019 agreement with FCPL, FRL’s promoter firm, in which it purchased a 49 per cent share in the Company for around Rs. 1,500 crore.
Amazon then took FRL and its shareholders to the Singapore International Arbitration Center (SIAC), where an Emergency Arbitrator in October 2020 issued an interim ruling in favour of Amazon, preventing FRL from taking any further action until the matter is resolved.
Amazon has filed lawsuits against FRL in the Delhi High Court, the Supreme Court, and the National Company Law Tribunal.
According to FRL’s statement to the Delhi High Court, “Amazon has ruined a 26,000 crores firm for 1,400 crores (the value of the contested Amazon-Future contract). Amazon set out to ruin us, and it was successful. Amazon has accomplished what it set out to achieve.”
After FRL failed on its lease payments in February, Reliance Retail took over the operations of at least 350 of the Kishore Biyani-led group’s outlets. In reaction, Amazon said that the transfer of Future Retail’s assets resembled “Ripley’s Believe it or Not,” claiming that FRL let rid of nearly 800 stores without objection.
Edited by Prakriti Arora