Future Retail’s independent directors turn down Amazon’s bailout offer

Future Retail Ltd’s board has rejected Amazon’s offer of financial support through a transaction with private equity firm Samara Capital, claiming that the offer is “plainly an attempt to buy the FRL assets on the cheap.”

Last week, FRL’s independent directors asked Amazon if the e-commerce behemoth would be willing to provide long-term credit to avoid defaulting on a Rs 3,500 crore loan due on January 29. Amazon responded that it was willing to help Future Retail financially through the Samara Capital arrangement, but that the retailer would have to abandon a Rs 24,713 crore deal with Reliance.

In a letter dated Tuesday, FRL’s independent directors stated that Amazon’s letters were “simply a game of smoke and mirrors.”

Samara Capital had advised FRL that it is still interested in purchasing out Amazon’s debt-ridden retailer’s companies like Big Bazaar for Rs 7,000 crore and had asked FRL to send its financial records to Samara Capital so that the private equity fund may do expedited due diligence.

The price of Rs 7,000 crore, according to the independent directors, is “far less than the amount required to satisfy FRL’s overall liabilities.”

The letter also stated that the transaction with Reliance had been approved by FRL’s independent directors because it meets the needs of funds to pay off public sector bank lenders, suppliers of goods, and helps FRL meet almost all of FRL’s liabilities, while also protecting the investment of small shareholders and the jobs of over 25,000 employees.

Copies of the letter were also submitted to the Enforcement Directorate, the Securities and Exchange Board of India, the Competition Commission of India, lenders such as State Bank of India, Union Bank of India, and Bank of Baroda, and the FRL Board of Directors.

Future and Amazon have been embroiled in a bitter legal battle since the US e-commerce behemoth dragged Future Group to arbitration at the Singapore International Arbitration Centre (SIAC) in October 2020, claiming that FRL had breached their contract by agreeing to a slump sale of its assets to Mukesh Ambani’s Reliance Retail.

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