Reliance Retail calls off Future merger deal

In a strange twist to the tale, Reliance Industries has said that with the secured creditors of Future group rejecting the merger deal with Reliance Retail Ventures, they had decided to call off the Rs.24,713 crore merger.

While the operational and unsecured creditors of Future group had voted in favour of the deal, the secured creditors (mainly the banks) had refused to approve the RIL merger deal on the grounds that it was not viable any longer.

In a regulatory filing with the stock exchanges, Reliance has contended that since the secured creditors of Future Retail Ltd (FRL) had voted against the scheme of arrangement, it could no longer be implemented.

The scheme entailed transfer of retail and wholesale business as well as the logistics and warehousing business of Future Group to Reliance Retail Ventures Ltd and Reliance Retail and Fashion Lifestyle Ltd. Now that stands cancelled.

Interestingly, the man given the charge of managing the transition by the NCLT was the redoubtable Shailesh Haribhakti. In a recent development, Haribhakti resigned citing rather volatile, complex and unpredictable legal and financial circumstances.

Haribhakti also said that the recommendation of the board to find solutions were not met with implementation impetus. Haribhakti had chaired meetings of shareholders since the deal announcement.

Last week, the Future group had called meetings of the shareholders of all its group companies as well as the secured and unsecured creditors to approve the scheme of amalgamation. However, the mandatory 75% approval proved to be elusive.

The said meetings had been opposed by Amazon, due to the pendency of the legal case in Singapore, but an Indian court had struck down the Amazon request and allowed the meeting to go on.

Since the time the deal was announced in August 2020, it had been subject to in-depth scrutiny. Apart from Amazon, due to its stake in Future coupons, other agencies like the Supreme Court, Delhi High Court and the NCLT had also been involved at various levels and capacities.
 

Besides, the case was also subject to proceedings at the Singapore International Arbitration Centre (SIAC), which is still in a state of pendency.

However, the equations changed after Reliance Retail took over about 350 stores of Future Retail including the employees due to Biyani missing lease payments to the landlords. Reliance had taken the lease and sub-let to Future group.

With consistent defaults, RRVL had no choice but to take over the stores. That almost sounded the last straw for the Kishor Biyani group as they had no assets left with even inventory supplied on credit from Reliance.

Except for Future Supply Chain Solutions, the other listed Future entities like Future Retail, Future Lifestyle Fashion, Future Market Networks and Future Consumer failed to get the mandatory 75% favourable vote from secured creditors in favour of the scheme.

In the case of Future Consumer and FMNL, all the secured creditors had voted against the merger deal. In the case of FRL, while shareholders were in favour of the deal, 70% of secured creditors voted against the deal.

This puts a lot of parties virtually in the lurch. The shareholders are now unlikely to be able to recover anything from their shareholdings. Even the fate of the current board of FRL and other companies is uncertain with the secured creditors now planning to approach the NCLT for insolvency proceedings.

The big question is can they recover or recoup anything from the debris of the failed realty company. It does look like a very long shot. The haircuts may be huge, with hardly any assets worth the name.