The deal between Mukesh Ambani-led Reliance Industries and Future Retail is reportedly set to be announced soon as both companies have resolved differences over some of the terms and conditions of the deal, the Economic Times reported. Following these reports, the stock of Future Retail surged by 4.97% to Rs 100.35 on Monday, hitting the upper circuit. Reliance Industries has been in talks with Kishore Biyani-led Future Group for several weeks to acquire its retail business, which runs Big Bazaar, and other retail stores.
The deal, which is set to be announced soon, reportedly faced hurdles with some disagreement over what role Kishore Biyani will play post the deal and also over the valuation of Future Retail. The deal is likely to be a mix of share-swap and cash.
Kishore Biyani is known as the pioneer of modern retail, having built the highly successful large-format retail chain Big Bazaar. This would be the second time that Biyani has had to sell off businesses to pare down debt. Eight years ago, he sold his apparel store business Pantaloons to Aditya Birla group when the company saw its debt mounting.
If Reliance acquires only a minority stake in Future Retail, Kishore Biyani is likely to remain at the helm, with Reliance taking two board seats. However, if the deal extends beyond that, it could mark the end of Biyani’s play in this industry, ET reported.
Future Retail also runs Fashion BigBazaar (FBB), FoodHall, Hypercity, Easyday stores, Heritage Fresh, Ezone, among others.
Persons familiar with the development told TNM earlier that a deal with Reliance is likely to see the company selling a stake in more than just Future Retail and also include stake sales in Future Consumer and Future Lifestyle as well.
Future Consumer includes the company’s food, home and personal care. This comprises food brands such as Nilgiris, Tasty Treat, Karmiq, Desi Atta, Golden Harvest, Sunkist; homecare brands such as Clean Mate; and personal care brands such as Kara.
Future Lifestyle includes its discounted fashion store Brand Factory and retail mall Central.
The promoters of the Future Group hold 42% in Future Retail, however, 75% of the holding is reportedly pledged as on June 30, 2020.
As per reports, another point of disagreement has been the valuation of the company. This could become tricky especially after the company missed an interest payment on its US dollar-denominated bonds last week following which Fitch cut Future Retail’s credit ratings to C from CCC+.
“The board members of Future have finally agreed with the final contours of the deal that was being worked out among the parties. A resolution will be passed over the next few days,” a person familiar with the development told ET.
Kishore Biyani has been looking to sell company assets to pare down debt, which has ballooned to nearly Rs 12,800 crore. It is also looking to sell a stake in its logistics business and insurance business.