Reliance cancels $3.4 billion deal with India's Future Group

Reliance Industries announced last weekend that its deal with Future Group has been canceled. In an exchange filing, the Indian multinational conglomerate company headquartered in Mumbai said on Saturday that the deal could not be implemented as the latter’s secured creditors have voted against it.

"The shareholders and unsecured creditors of Future Retail have voted in favor of the scheme but the secured creditors of FRL have voted against the scheme,” Reliance stated in the filing. “In view thereof, the subject scheme of arrangement cannot be implemented."

As per Reuters, the creditors’ rejection comes in the midst of a legal battle initiated by Amazon Inc. The American e-commerce giant accused Future Retail of breaching specific contracts by dealing with Mukesh Ambani’s Reliance Industries company.

In any case, Reliance’s takeover of Future Retail cannot take place any longer since secured creditors have rejected Future Retail Limited’s Rs 24,713 crore deal to sell its assets to Reliance Indutries’ subsidiary, Reliance Retail Ventures Ltd. it was in 2020 when Ambani’s company sought to acquire Future Retail and other assets for $3.4 billion after the Indian supermarket firm was badly hit by the COVID-19 pandemic.

With the rejection of the deal by creditors, Future is now facing the possibility of getting into a bankruptcy process. If the acquisition deal has been approved by the lenders, Future Group’s retail chain brands, including Brand Factory, Food Bazaar, Big Bazaar, Central, FBB, and HomeTown will be taken over by Reliance Retail.

The Indian Express reported that the secured creditors’ e-voting showed that 69.29% of the votes from 11 lenders have declined the proposal to sell while 30.71% from 34 lenders have agreed. With the turnout, banks are now expected to move the bankruptcy court for a resolution plan.

On the other hand, the unsecured creditors agreed with the plans to sell as 78.22% were in favor. Additionally, during a recent shareholders' conference, 85.94% of the votes also agreed to the Future’s sale of assets to Reliance, and only 14.05% voted against it.

Meanwhile, some Indian financial institutions that are not in favor of the plan explained that their stance was due to the ambiguity on debt recovery. A banking insider said, “If top banks are opposing the sale to RIL, the deal is likely to fall through and the next option is to take the Insolvency and Bankruptcy Code (IBC) route.”