Future Group (FG) on 29-8-20 entered into a deal, by which, Reliance Retail will be acquiring the Retail & Wholesale Business and the Logistics & Warehousing Business from the FG, as going concerns on a slump sale basis, for lump sum aggregate consideration of INR 24,713 crore. Reliance Retail also proposes to invest:(a) INR 1,200 crore in the preferential issue of equity shares of FEL ( Future Enterprises Ltd, being the resultant merged company, after merger of 5 other companies of FG), to acquire 6.09 % of post-merger equity; and (b) INR 400 crore (with an eventual investment of INR 1,600 crore) in a preferential issue of equity warrants, which, upon conversion and payment of balance 75% of the issue price, will result in Reliance Retail acquiring further 7.0% in FEL.
On 29-8-20, M cap of 6 companies of FG was at INR 14,400 crore, which fell to INR 7,700 crore now, as Amazon has challenged this deal, on which Inernational Arbitrator (matter having referred to Arbitration) has put a stay on the deal.
Whatever maybe the outcome of the Arbitration, it is sure that FG is hard pressed to have this deal through, either with Reliance Retail or Amazon, due to debt having piled up on the Group.
Market experts feel that FG stocks seen having bottomed out now, while deal if happens with Amazon, there will be value accretion in FG shares. The result of arbitration may be seen in next 3-6 months.