Mukesh Ambani's Reliance Retail Ventures (RRVL) will hold 13.14 per cent stake in Kishore Biyani's Future Enterprises Ltd (FEL) post the Rs 24,713 crore deal. RRVL will enter into a long term agreement with FEL for sourcing branded fashion and FMCG products. However, FEL will have the freedom to sell their products to other retailers also.
Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL, will invest Rs 1,200 crore in FEL to acquire 6.09 per cent as preferential shares. It will also invest Rs 1,600 crore for preferential equity warrants, which will be 7.05 per cent equity upon conversion in 12-18 months. RRFLL will pay Rs 400 crore initially for the warrants.
After selling the food and fashion assets to RRVL and its subsidiary, FEL will be left with the manufacturing and distribution of FMCG goods and integrated fashion sourcing and manufacturing business and its insurance JVs with Generali and JVs with NTC Mills. According to the valuation at which Reliance is buying the shares and warrants, Biyani's FEL will be valued Rs 21,000 crore after the deal.
Reliance will paying Rs 24,713 crore for the key formats of Future group such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory, besides the logistics and warehousing business. It will take over certain borrowing and liabilities, the companies said.
According to sources, the value of Rs 24,713 crore includes Rs 12,000 crore debt of Future group. After the deal, the FEL will have surplus cash and debt of around Rs 3,000- 4,000 crore, said sources.
As the first step of the deal, Future group will consolidate the retailing businesses scattered across six Future group companies FEL, Future Retail, Future Lifestyle Fashions, Future Consumer, Future Supply Chain and Future Market Networks. FEL will do the slump sale after the consolidation.
The deal is definitely a booster for Biyani as he gets rid of his liabilities and retains a leaner food processing and fashion sourcing and manufacturing business.