Deal with M&A request, ignore letter from Amazon, Future Retail urges stock exchanges
Future Retail has asked BSE and NSE to process its request to merge and acquire its retail assets by Reliance Industries (RIL).
The statement – released to the stock exchanges on Sunday – comes after Amazon wrote to the Securities and Exchange Board of India (Sebi) and the exchanges last week, asking them to review the Singapore arbitrator’s provisional judgment, which suspended the Rs 24,713- crore deal between Future Group and RIL.
Future urged stock exchanges to ignore Amazon’s letter or the emergency arbitrator’s order, calling it entirely “ill-conceived.”
Future Retail argued in its statement that Amazon’s assertion, regarding the alleged violation of a non-compete clause in a 2019 agreement between a Future promotion entity (Future Coupons) and the e-merchant, was incorrect. The deal gave Amazon an indirect 5% stake in Future Retail.
“If the two separate 2019 agreements (between Amazon and Future Coupons, and Future Retail and its promoters) were treated as a single integrated transaction whereby Amazon obtained an interest and rights against Future Retail, then in 2019, when the agreements were executed, there would have been a change of control of Future Retail in favor of Amazon, forcing it to make an open offer to the public shareholders of Future Retail in accordance with SEBI (Substantial Acquisition of Shares and Takeovers) regulations, 2011 No such open offer was made, suggesting that Amazon had no intention of viewing the two agreements as one integrated transaction at this time, ”the company said.
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Future Retail also noted that Amazon’s claims were at best a “contractual dispute” between the e-merchant and its promoters, and that the e-merchant had already initiated arbitration for the same as well as damages of Rs. 1,431 crore, plus interest.
“It is suggested that Sebi and the exchanges should independently review the plan of arrangement on its merits and in accordance with Sebi’s bylaws. A contractual dispute between the promoters of Future Retail and Amazon may not restrict or interfere with the authority of Sebi and the stock exchanges to approve the program involving the listed entity. To be clear, the emergency arbitrator’s order in no way can and does not prevent Sebi or the Exchanges from reviewing and approving the project, ”he said. Future Retail had previously said in its October 26 press release that actions taken by the company and its board could not be delayed in arbitration proceedings to which it was not a party.
“This order will need to be tested under the provisions of Indian Arbitration Law in an appropriate forum,” the company said.
Legal experts and analysts had told Business Standard that Future Group and Amazon should seek an out-of-court settlement. “Amazon has gone to court to speed up the problem it has with Future Group. A delay in the transaction is something Future and Reliance cannot afford. It could push them to reach a settlement with Amazon, and Consent terms could be filed in court, “said HP Ranina, corporate lawyer. Abhimanyu Sofat, head of research at IIFL Securities, said Future and Amazon have legal arguments in their favor regarding the dispute.
“It is better that the two settle the dispute amicably. Amazon’s investment is nil, given that Future Group is in debt. The latter is unable to continue operating without the help of a third party, which is Reliance, ”he said.