Reliance Retail Finalizes Acquisition of Future Retail

Reliance Retail Ventures Limited (a subsidiary of Reliance Industries Limited), recently acquired the retail arm of Future Group for 24, 713 crores. The acquisition includes the retail, wholesale, warehousing as well as the logistics arms of the business of Future Group. As far as the retail sector goes, this is one of the biggest merger and acquisition in India.For more such details and updates on deals in the Indian M7A market, please follow Ricky Chopra International Counsels, a leading Corporate Law Firm in Delhi.

What this means for Reliance

Prominent fashion brands like Fashion Big Bazaar (FBB) and retail majors like Big Bazaar will now be controlled by Reliance Retail. It shall also have access to the approximately 1800 stores, earlier owned by the Future Group. The deal has been entered into at a strategic time when retail majors are vying to dominate the Indian consumer market amongst stiff competition from e-commerce markets.The transaction will occur in two phases. While the retail and wholesale arms of the business will be transferred to another subsidiary of Reliance retail, the logistics and warehousing arms shall be transferred directly to Reliance Retail. With this Reliance plans to gain presence over both online as well as offline retail industries. While the recent investment of Facebook in its e-commerce line, JioMart ensures that it accesses the e-commerce market through Facebook’s WhatsApp. The acquisition of Future Group shall now ensure widespread access to the offline market.

Why Future group Agreed to the Transfer

Kishore Biyani, the Chief Executive Officer of Future Group has reportedly claimed that the deal was entered into keeping in mind the best interests of all stakeholders including the shareholders, investors, creditors etc. he has also said that the deal shall not affect the employees of Future group, who shall continue to be a part of the respective brands. The deal shall help Future Group reduce its debt burden. Additionally, Future Enterprises Limited (FEL) also intends to subscribe to preferential equity of 6% in the post-merger entity.

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Conclusion

The deal now awaits the approval of the Competition Commission of India (CCI), which shall analyse if the transaction shall cause any appreciable adverse effect on competition in the relevant market in India. What constitute relevant market is subject to the scrutiny of the CCI. With increasing competition from e-commerce players and the consumer behavior shifting toward online purchases, it remains to be seen whether the acquisition brings about the expected results.

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