Global e-commerce major Amazon has sent a legal notice to Future Group over its deal with Reliance Retail to sell the retail and wholesale business. Amazon has reportedly said that the deal breaches its non-compete agreement with Future Group. In August 2019, Amazon picked up a 49% stake in Future Retail’s promoter entity Future Coupons. This deal gave Amazon an indirect 3.6% stake in Future Retail.
According to industry sources, Amazon has said that it has the first right to pick up a stake in Future Retail given its 49% stake in Future Coupons. However, the deal between Amazon and Future Group in 2019 stated that three years from then, subject to the prevalent FDI norms at the time, promoters of Future Retail can sell a partial or controlling stake to Amazon.
Top industry sources have said that the legal notice has come as a surprise to Future Group since Amazon was first approached for investment before the deal with Reliance. Amazon was also kept in the loop about the deal, which was finalised only after Amazon said it has no objections.
“It’s surprising that Amazon has sent a legal notice nearly two months after the deal was announced. Why didn’t they say anything earlier then? We have proof of discussions with them. Moreover, Amazon can only pick up a stake in Future Retail three years from the deal. It has only been a year. The deal terms also state that this is subject to prevalent FDI norms and current norms don’t allow a foreign entity to pick up a direct controlling stake in an Indian retail firm. Hence, Amazon’s notice has no legal grounds,” the source said.
Future Group declined to comment on the legal notice. TNM has reached out to Amazon for a comment and is yet to hear from them.
“This notice has no real legal grounds. I don’t think it will even go to court,” another source said.
In August, Reliance Retail announced that it will be buying Future Group’s retail, wholesale and logistics business in a slump sale for Rs 24,713 crore. This included Future Group’s flagship retail formats Big Bazaar, FBB, Food Hall, among others. Future Group has been facing a severe liquidity crunch, which was made worse due to the COVID-19 pandemic.