Future Retail Limited has acquired the retail and allied businesses of Heritage Foods Limited, a company owned by Andhra Pradesh Chief Minister N Chandrababu Naidu. Heritage will now focus on dairy as a single line of business.
The two companies on Monday signed a definitive agreement, under which all existing 124 retail stores of Heritage in Hyderabad, Bengaluru and Chennai will become part of Future Retail network.
Naidu’s son and one of the Directors of Heritage Foods N Lokesh, daughter-in-law and Executive Director of the company N Brahmini and Future Retail Limited Chairman and Managing Director Kishore Biyani announced the partnership at a news conference.
Heritage Foods, headed by Naidu’s wife N Bhuwaneswari, has a presence in retail, bakery, agri, dairy, veterinary care and renewable energy.
Under the agreement, retail, bakery and agri businesses of Heritage will become part of Future Retail.
Another 20-25 retail stores planned to be opened by Heritage during the current financial year will also become part of the Future network.
Heritage also announced that its 2,600 employees will be retained by Future Retail with the existing working conditions.
“On closure of the transaction, Heritage Foods Limited will own 3.65 per cent of shareholding in Future Retail Limited, through fresh issuance of shares by the Company,” the joint statement said.
Lokesh put the valuation of the three business at Rs 295 crore. He, however, said Heritage would not get any seat on any board of directors in Future Retail.
“As part of the scheme of arrangement for the acquisition, Heritage Foods Limited will spin off its retail, bakery, agri-sourcing and veterinary care business in a fully owned subsidiary. Subsequently, all these businesses, except veterinary care, will then be merged with Future Retail Limited. The scheme shall be subject to approvals from relevant regulatory authorities and shareholders of the companies,” the joint statement added.
The retail and allied businesses of Heritage Foods posted revenues of Rs 629.70 crore during 2015-16.
All 124 small format stores of Heritage in three southern cities will continue to be run under the brand name ‘Heritage Fresh’.
Lokesh said the partnership would enable Heritage to consolidate and focus on dairy as a single line business as it has the ambition to become the largest private dairy company in the country.
“Heritage dairy products will be sold pan-India through Future Retail stores while Future Retail products will be available at Heritage dairy parlours,” he said.
Heritage started the dairy business in 1992 and has a market presence across 10 states with 1,13,500 outlets.
He pointed out that Heritage became a pan India player after the recent acquisition of the Reliance dairy business.
Heritage currently has 13 lakh liters operation per day and it has set a target of 30 lakh liters by 2021.
It expects to add seven lakh liters through organic growth and 10 lakh liters through acquisitions.
Biyani said the agreement would bring together synergies and help Future Retail consolidate in southern India.
He said this would complement Future Retail’s existing network of 379 small format EasyDay stores in northern cities.
Future Retail currently has about 700 stores across the country and it has set a target of 4,000 stores by 2021.
Biyani said while 3,000 stores would be their own, 1,000 would come up under franchise model.