Saturday, December 2, 2023

RIL-Future deal: How Mukesh Ambani ensured Amazon does not become a shareholder in Reliance Retail

Last year, Amazon acquired 49% stake in Future Coupons, a Future Group company for an undisclosed amount. As part of the deal Amazon got the right to acquire Biyani’s stake in Future Retail at a future date.

“As part of the agreement, Amazon has been granted a call option. This call option allows Amazon to acquire all or part of the Promoters’ shareholding in Future Retail Ltd. And is exercisable between the 3rd to 10th years, in certain circumstances, subject to applicable law,”.

But Mukesh Ambani structured the deal with Future group in such a way that Amazon stays away from getting a stake in either Future Enterprises or Reliance Retail.

If Reliance Retail would have acquired Future companies directly, rather than acquirising retail assets of Future Group, then probably Amazon could have got a stake in Reliance Retail too.

According to the details of the deal between Future Group and RIL, Future Enterprises will merge 19 retail and its related back-end infrastructure companies, including Future Retail, into itself. This company will then transfer the retail and supply chain businesses to two separate arms of RIL.

With the proposed deal structure where RIL acquires Future Group’s retail assets and not its companies, the former has ensured that competitor Amazon is not its shareholder.

RIL will invest Rs 1,600 crore by way of preferential shares and warrants convertible into equity, to acquire a 13% stake in the residual Future Enterprises.

As per the new scheme of things, Amazon will get shares of Future Enterprises after the merger of Future Retail and other assets with the latter.

Future Retail shareholders, according to the terms of the deal, will receive 101 shares with a face value of Rs 2 each of Future Enterprises for every 10 shares of Rs 2 each held.

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