FRL rejects Amazon offer to help with Samara Capital

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FRL rejects Amazon offer to help with Samara Capital

Independent directors of Future Retail Ltd FRL turned down Amazon's offer of financial support to the company through a deal with private equity firm Samara Capital, saying the offer was 'plainly an attempt to buy FRL assets on the cheap. FRL's independent directors asked Amazon last week if the e-commerce giant would give a long-term loan to avoid default on repayment of Rs 3,500 crore loan due on January 29. Amazon said it was willing to financially support Future Retail through the Samara Capital deal but the retailer must shelve Rs 24,713 crore deal with Reliance.

The independent directors of FRL said in a letter seen by PTI that Amazon's letters were ''just a game of smoke and mirrors and that they will not be assessing any proposals from you until an actual solution meets FRL's capital requirements and addresses concerns of its stakeholders.

Amazon had told FRL that Samara Capital is interested in buying out the debt-strapped retailer's businesses, such as Big Bazaar, for Rs 7,000 crore, and had asked FRL to provide its financial details to Samara Capital for a private equity fund to conduct expedited due diligence.

The independent directors said the price of Rs 7,000 crore is'significantly less than the amount needed to discharge FRL's total liabilities' FRL's Bank liabilities and part of the commitments payments until just March 2022, which has resulted in a total of Rs 12,027. There were 31 crores. When viewed in the context of the Financials of the Reliance transaction by way of the Scheme of Arrangements, your offer is plainly an attempt to buy the FRL assets on the cheap, the letter stated.

The independent directors of FRL had accepted the transaction with Reliance as it addresses the needs of funds to pay off public sector bank lenders, suppliers of goods and helps FRL meet almost all of FRL's liabilities, and in the process helps protect the investment of small shareholders and jobs of over 25,000 employees.

Copies of the letter were also sent to Enforcement Directorate, Sebi, Competition Commission of India, lenders like State Bank of India, Union Bank of India and Bank of Baroda, as well as the FRL Board of Directors. The independent directors said the Scheme of arrangement with Reliance Retail will be a court-approved transaction, and that it will be fully-compliant with Indian laws, and that it will be fully-compliant with Reliance's proposed transaction with Samara Capital.

Future and Amazon have been locked in a bitter legal dispute after the US e-commerce giant FRL dragged Future Group to arbitration at the Singapore International Arbitration Centre SIAC in October 2020, arguing that FRL had breached their contract by entering into a deal for the sale of its assets to billionaire Mukesh Ambani's Reliance Retail on a slump sale basis.

The independent directors, in the January 25 letter, raised concerns about the structure of the proposed deal with Samara.

In response, you clarified that Amazon would facilitate discussions, with your exact role and relationship with Samara Capital being unclear. It said Amazon should act with transparency in matters of funding of an Indian listed company.

The independent directors also stressed that foreign investment in multi-brand retail is unavoidable without government approval, and any investment by Samara must be transparent and not an indirect investment by Amazon, contrary to the rules.

It is necessary that the Amazon Samara discloses the ultimate beneficial owners contributories to the Samara fund in India through various layers to us and the authorities. It said Amazon had not directly or indirectly funded any amount to Samara.

The independent directors said FRL has a clear urgency of funds, and Amazon has suggested an extensive due diligence exercise as an alternative and has not even been able to provide any timeline for funding. In a separate development, FRL has approached the Supreme Court requesting to pass a direction to its lenders from declaring the company as a non-performing asset in case of a default of Rs 3,495 crore loan dues.

The due date for payment of Rs 3,494 was missed last month. It could not sell assets due to its ongoing litigation with Amazon and has impacted its monetisation plans as 56 crore were handed over to banks and lenders. There is still time to make the payment at the end of the month.