Reliance Calls Off Rs 24,713-Crore Deal With Future After Secured Creditors Gives A Thumbs Down
The meetings were challenged by Amazon, which acquired a 49 per cent ownership in Future Coupons Pvt Ltd (FCPL), a promoter business of FRL, in 2019.
New Delhi: Reliance Industries Ltd said on Saturday that a Rs 24,713-crore deal with Kishore Biyani's Future Group to purchase its retail, wholesale, logistics, and storage operations could not go through since secured creditors of the latter voted against it over 21 months after signing the agreement, news agency PTI reported.
Future Group firms, including Future Retail Limited (FRL) and other listed companies engaged in the plan, have informed their shareholders and creditors of the results of the scheme of arrangement vote at their respective meetings, according to a regulatory filing.
"... The secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented," RIL said while providing an update on the scheme of arrangement for the transfer of Future Group's retail and wholesale business, as well as its logistics and warehousing business, to its subsidiaries Reliance Retail Ventures Ltd (RRVL) and Reliance Retail and Fashion Lifestyle Ltd. (RRFLL).
This week, the Future Group firms convened meetings of their shareholders, secured and unsecured creditors to seek approval of the scheme of merger and asset sale announced with Reliance Retail.
Secured creditors, namely banks and financial institutions, of the listed firms - Future Retail, Future Enterprises, Future Lifestyle Fashion Ltd, Future Market Networks, and Future Consumer - did not obtain the required 75% clearance.
Nonetheless, the shareholders of the listed businesses had backed the Reliance purchase.
"We refer to our earlier communication of 22nd April, 2022 wherein the voting result of the NCLT convened meetings of Shareholders, Secured Creditors and Unsecured Creditors was communicated. In view of the result as already communicated, we would like to inform that the subject Scheme cannot be implemented," a release by Future Retail stated.
The meetings were challenged by Amazon, which acquired a 49 per cent ownership in Future Coupons Pvt Ltd (FCPL), a promoter business of FRL, in 2019.
Future Group announced a Rs 24,713-crore deal in August 2020 to sell 19 retail, wholesale, logistics, and storage enterprises to Reliance Retail Ventures Ltd. (RRVL).
RRVL is the holding company for all of the RIL Group's retail operations.
Amazon, the world's largest e-commerce company, aggressively opposed the acquisition, claiming that it breached a 2019 agreement in which it acquired a 49 per cent ownership in FCPL, the promoter firm of FRL, for around Rs 1,500 crore.
Future Group, Reliance Retail, and e-commerce behemoth Amazon, which is opposed to the acquisition, had no immediate remarks on the situation.
After the Kishore Biyani-led firm failed to make lease payments to landlords, Reliance Retail took over the operations of at least 350 FRL outlets and provided jobs to its staff in February.
Amazon has taken FRL and the promoters to the Singapore International Arbitration Center (SIAC), where the EA (the emergency arbitrator) issued an interim decision in favour of Amazon in October 2020. It had prohibited FRL from disposing of or encumbering its assets or issuing securities in order to obtain funds from a restricted party.
Following this, a slew of lawsuits was filed before the Delhi High Court, the Supreme Court, and the NCLT.
As a result, RRVL was compelled to prolong the Scheme's long-stop date three times. It extended the deadline for another six months, to September 30, 2022, last month.
According to the planned arrangement between Future Group and Reliance Retail, 19 of the former's firms would be combined into a single entity called Future Enterprises Ltd (FEL) and subsequently handed to RRVL.
However, according to the vote results provided by FEL on Friday, 99.97% of its secured creditors oppose the strategy.
Despite the fact that the purchase was endorsed by 99.99 percent of the company's owners. Its 62.65 percent of unsecured creditors voted in favour of the scheme, while the remaining 37.34 percent of votes cast were against it.
Except for Future Supply Chain Solutions Ltd, all listed Future group firms, including Future Retail, Future Lifestyle Fashion Ltd, Future Market Networks, and Future Consumer, fell short of the required 75% vote in favour of the scheme.
100% of secured creditors voted against the agreement in two firms, Future Consumer and Future Market Networks.
In a regulatory statement on Friday, FRL, the flagship business of Future Group, stated that 69.29% of secured creditors voted against the sale, while 30.71% voted in favour of it.
Around 85.94% of FRL shareholders voted in favour of the agreement with Reliance, while 14.06% voted against it.
Section 230 (6) of the Companies Act, 2013 requires that the plan of arrangement sanctioned by the National Company Law Tribunal (NCLT) be accepted by a "majority of persons representing three-fourths in value" at a meeting of creditors or members (shareholders).
Furthermore, the status of the FRL board and management is unknown, as the firm is currently facing an insolvency petition before the NCLT.
Last week, public sector lender Bank of India filed an insolvency petition with the NCLT's Mumbai bench, requesting bankruptcy procedures and a suspension of the assets.
(With PTI Inputs)
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