Reliance Retail, Future Group to ignore Amazon’s objection to $3.4. Billion Acquisitions

Reliance Retail in India is challenging Amazon’s objection to its acquisition of future group which is a $3.4 billion deal and the company plan to complete the deal without any delay.

Receiving an emergency order from a Singapore arbitration court yesterday to halt the deal between two Indian retail companies which is a victory for Amazon that faces a competition between reliance retail and Wal-Mart.

But the CEO of Reliance Retail, Mukesh Ambani states that under the Indian law that deal is fully executable.

Amazon brought a 3.58% stake in Future group by owning a 49% stake in its Future coupons business which provides Amazon grounds to object to the deal. Two companies agreed early this year and granted rights to sell Future Group’s products online for a long time. Future Coupons offers value-added products and solutions such as loyalty cards, gift cards; reward cards, etc. through the deal with Future Retails Amazon indirectly received 3.6% in Future Retail. Amazon E-commerce Company took an indirect route because amazon is not allowed to take a majority stake in future retail according to current Foreign Direct Investments norms.

In 2020 January Future retails has announced they will make a long-term business agreement with Amazon India so that Future Retail store’s authorized online sales channel would be Amazon.  Due to Covid 19, pandemic Future Group was seeing losses and mounting debts because the shops were forced to stay shut and lost around 7000 crore in revenue in the first 3-4 months during the pandemic. Future Group has announced that they are selling wholesale, retail, and logistics business to reliance retail. This deal includes 1550 stores with FBB, Big Bazaar, Brand Factory, Easyday, WhSmith, Food hall, Heritage Fresh. After the deal completion Reliance Retail will own 13.14% in Future Enterprises. This deal could be the largest retail deal in the Indian market. According to the reports, Amazon will continue to stay on as a shareholder.

To block a merger between the two firms amazon filed a motion with the internet arbitration center in Singapore earlier this month. VK Rajah, the former Attorney General of Singapore, was the arbitrator for the case. According to Amazon, it says that this deal between future groups and reliance violates the non-compete agreement with Future Group where Future group is not allowed to enter in to share scale agreement without its consent. Amazon reportedly alleged that the non-compete clause was violated and their consent wasn’t taken before completing the deal with Reliance.

Reliance Retail being India’s largest retail company which owns nearly 12,000 physical store locations in 6500 in India. By selling 8.5 stakes to Singapore GIC, Silver Lake, and General Atlantic, and other companies, this company has raised $5.14 billion in the last two months. Future Group agreed on the deal with reliance industries due to pandemic and prevent the company from business losses which are explained by virtual conference earlier this month.

Amazon and Reliance Retail are fighting over dominance in the retail sector in India. According to Reliance Retails, rights and obligations under the agreement are fully enforceable under Indian law. Future Retails and Reliance have states their decisions to close the deal without delay. They state that this deal didn’t breach or violate any contact with amazon because amazon is a separate entity.