Ambani suffers legal blow in $3.4bn deal tussle with Bezos

Reliance Industries and vying to acquire cash-starved Future Retail

Mukesh Ambani announced his plans to buy Future Retail’s assets almost a year ago to help aid his retail push in India. World Economic Forum
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Mukesh Ambani’s planned $3.4 billion purchase of an indebted retailer suffered a blow after won a court battle to halt the transaction, disrupting the Indian tycoon’s ambitions to take on the US e-commerce giant in the $1 trillion local market.

On Friday, a two-judge bench of India’s Supreme Court ruled that an emergency order by a Singapore arbitrator last year, which stopped Reliance from proceeding with the deal, is legally binding. Amazon had approached the arbitration court in the city-state, and the parties will now have to wait for the deliberations of that body before a final decision.

The Indian court’s verdict is the latest episode in a bitter battle over cash-starved Future Retail – the nation’s second-largest supermarket chain – which both Jeff Bezos-founded Amazon and Mr Ambani’s Reliance Industries want to control.

The companies, respectively owned by two of the world’s richest men, are fighting for a bigger slice of the only billion-people-plus consumer market that is still open to foreign companies.

The top court also upheld a previous ruling that ordered a freeze on assets of Future Group founder Kishore Biyani.

Reliance dropped as much as 2.6 per cent in Mumbai on the ruling, the biggest intraday decline in two weeks. Future Retail plunged by its daily limit of 10 per cent, the most in more than four months.

For Seattle-based Amazon, adding Future’s Big Bazaar brand of stores to its assets would help expand its brick-and-mortar footprint in the country.

Mr Ambani announced his plans to buy Future’s assets almost a year ago to help his retail push. His oil-refining conglomerate has identified e-commerce and conventional retail as two focus areas and in 2020 roped in investors, including Facebook and Alphabet’s Google.

“The court verdict puts a speed breaker on Reliance’s retail dominance in India,” said Devangshu Dutta, founder and chief executive of the Delhi-based retail consultancy, Third Eyesight. “It balances the competition with the larger American players, and gives Amazon a much-needed presence in physical retail.”

The court verdict puts a speed breaker on Reliance’s retail dominance in India
Devangshu Dutta, founder and chief executive, Third Eyesight

A spokesman for Amazon said “we hope this will hasten a resolution to the dispute”. Reliance did not immediately comment on the ruling.

Future Retail said in an exchange filing on Friday that it will pursue all available avenues and legal remedies to conclude the deal and protect investors and workers.

The verdict could be the death knell for Mr Biyani’s retailer if its planned asset sale to Reliance falls through. Future Retail suffered a severe cash crunch when India went into lockdown in March last year to curb the coronavirus outbreak. Future Group’s lawyers argued in court earlier that the transaction is crucial for the retailer’s survival and an aborted deal may lead to bankruptcy and job losses.

Future Retail’s 5.6 per cent $500 million January 2025 notes plunged 5.7 cents on the dollar to 66.3 as of 2.45pm in Hong Kong. That is the lowest level since August 27, according to data compiled by Bloomberg.

The feud highlights the importance of the Indian consumer market. Amazon has pledged $6.5bn of investment, while Walmart-owned Flipkart recently mopped up $3.6bn in the country’s largest fundraising at a valuation of nearly $38bn.

Amazon owns a stake in an unlisted Future unit and has argued that it contractually has the first right of refusal to buy Future. It went to the Singapore arbitration court last year, accusing the Indian retailer of breaching that contract when it agreed to sell its wholesale, warehousing, logistics and other retail assets to Mr Ambani’s conglomerate.

Updated: August 06, 2021, 10:18 AM