- Reliance Industries (RIL) has come close to agreeing to a deal to buy Kishore Biyani’s retail business of Future Group.
Reliance Industries (RIL) has come close to agreeing to a deal to buy Kishore Biyani ‘s retail business of Future Group.
The change will further cement the role of RIL as the top brick-and-mortar player across categories such as grocery stores, fashion and general merchandise, two people briefed on the subject.
The transaction will include at least three businesses that Biyani promotes — Future Retail, Future Lifestyle Fashions, and Future Supply Chain Solutions — going for a merger. The joint venture would then be purchased by the petrochemicals-to-telecom conglomerate owned by Mukesh Ambani.
The discussions are now at an advanced stage and RIL is keen to put it to a close before the upcoming July 15 AGM. Yet specifics on both sides are still being ironed out, and a final contract has yet to be signed, the sources said. Discussions for the deal started when one of Biyani ‘s holding units defaulted on a loan repayment earlier this year.
Since then, Biyani, known as the retail king, has been looking into options including stake sales in retail units and also putting up the insurance joint venture Future Generali for sale.
Many other companies such as US retail giant Amazon had shown interest in Future Group. Yet a contract with Reliance provides a far-reaching solution to the debt issues facing Biyani, a source said. “This is likely to be a complex transaction since, first, Future Group will announce an arrangement scheme to merge into one company.
RIL will most likely buy this merged company out entirely in exchange for its shares, “one of the sources said. Current investors in various businesses of the Future Group — Amazon, Blackstone, and PremjiInvest — can acquire shares in RIL. As Jeff Bezos-owned Amazon has had a business relationship with Future Group since 2014, the contract with Reliance is significant.
Amazon also held an indirect interest in Future Retail last year through investments in one of Biyani’s promoters.
“It is safe to say now that it is going in the direction of Reliance. While others are still in talks with Future, the strategic path is now apparent, compared to last week when it could have gone either way, “said a person aware of the matter. He added that while Reliance would take over all retail businesses, some brands and manufacturing businesses will stay with Biyani under companies such as Future Consumer and Future Market Networks. These details have yet to be finalized as Monday’s talks were underway.
Two different sources said the rights of Amazon, when it signed an agreement with Future Coupons giving it a nearly 4 percent interest indirectly in Future Retail last year, were “subjective to circumstances” and might not be a major obstacle to the contract.
“Reliance should definitely have looked at it before continuing on the contract,” said one of the previously described individuals.
Such people said Reliance ‘s involvement with this deal would have a “huge effect” on the retail sector — both online and offline. Future Retail has more than 1,500 retail stores in various formats through brands such as Big Bazaar, Nilgiris, and Easyday, while Future Lifestyle has 300 stores through Central and Brand Factory brands.
