Reliance vs Amazon fight makes for a cranky board at Future Retail
Two of the world’s richest men, fighting
over a near-bankrupt Indian retailer, have made so much noise that its board
has woken up super cranky. In less than a week, the three independent directors
of Future Retail Ltd. have shot off two
letters to the country’s competition authority, alleging that Amazon.com had
deliberately misled the regulator about the true nature of its 2019 investment
in a related entity. They want the antitrust watchdog to cancel the
transaction.
The 2025 dollar bonds of Future
Retail rose a little Monday, though they still trade at 61
cents to the dollar. Based on what an arbitration tribunal in Singapore has had
to say on the issue of alleged misrepresentation by Amazon, the maneuver looks
like a long shot. But one never can predict the course of regulatory action in
India. If the gambit succeeds, Asia’s wealthiest businessman, Mukesh Ambani,
may be able to get his hands on Future’s retail stores after all, a deal Amazon
boss Jeff Bezos has so far managed to block using judicial proceedings. A
scrapping of Amazon’s investment would leave the U.S. retailer with no valid
contract to stop the sale of assets to Ambani.
It’s rare for Indian boards to question the legality of agreements
that they’ve been involved in. But then, the stakes are high in the Ambani vs.
Bezos battle. The outcome could go some way toward determining which of the two
billionaires would ultimately control India’s $800 billion retail market. This
isn’t a war the directors can sit out — not with Future sinking under the
weight of 190 billion rupees ($2.5 billion) of liabilities, and relentless
losses that jumped 80% from a year earlier in the six months through September.
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directors to CCI
The unraveling of Future, a pioneer of modern mass retailing in
India with 1,500-plus stores spread across 16 million square feet, began some
time ago. The $192 million Amazon paid for a 49% interest in founder Kishore
Biyani’s Future Coupons Pvt. translated to indirectly owning roughly 10% of the
publicly traded Future Retail, at a premium to the prevailing share price.
Amazon, which gave the money expressly for Coupons to invest in the debt-laden
Retail, insisted on a list of restricted parties to whom the physical stores
couldn’t be sold without the e-commerce giant’s go-ahead. Ambani’s name was on
the list, and that’s why Bezos initiated arbitration proceedings for breach of
contract when Future brought in India’s No. 1 retail tycoon for a fresh $3.4 billion
rescue after it was hit hard by last year's pandemic.
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