The buyout, through cash, worth Rs 155 crore and shares worth Rs 500 crore would give Biyani control over 19 large outlets of HyperCity spread across Mumbai, Hyderabad, Bengaluru, Bhopal, Ludhiana, Amritsar, Jaipur, Pune, Ahmedabad, Delhi, and Noida.
“The board of directors has also approved to issue and allot in aggregate and up to 93,10,987 equity shares of Rs 2 each fully paid up, collectively to the sellers at a premium of Rs 535 per equity share on preferential basis,” Future Retail said in a press statement.
Future Retail says HyperCity will become a wholly-owned subsidiary of the company and the acquisition will be completed in three to five months.
The proceeds of the sale will also help the company pare debt, Edelweiss Securities said in a report.
Hypercity’s debt stood at Rs 327 crore at the end of June. Sales rose 8 per cent in the three months ended June while it’s like-to-like growth stood at 2.5 per cent, according to stock exchange filings. It reported a loss of Rs 26.9 crore during the period.
By acquiring Hypercity, Future Retail aims to leverage its retail capabilities by building economies of scale, reducing overall cost of operations, expanding the number of small/convenience outlets (especially in the metros), and pushing the sales of its margin-accretive private label consumer products.
Partner and National Leader – Retail and Consumer Products, EY, Pinakiranjan Mishra, said, “India holds a large appetite for mergers and acquisitions (M&A) among consumer products and retail (CPR) companies. This deal is a validation of that appetite, and such kinds of deals provide opportunities for consolidation which will add scale and efficiency, which are critical for the success of grocery retail. Such deals also indicate that more companies are looking for transformative deals to fundamentally alter their business strategy and disrupt the market. Companies that use strategic M&A to address disruptive forces across the consumer products and retail sector will be positioned to thrive in the years to come.”
Kishore Biyani: India’s Grocery King
Biyani has been known for aggressive expansion of the group’s operations though mergers and acquisitions. In the past, Biyani’s Future group has acquired Bharti Retail, South India-based convenience store chain Nilgiris and retail business of Heritage Food.
In May 2015, the Future group announced that it had agreed to merge its retail business with rival Bharti Retail in an all-stock deal worth Rs 750 crore to create one of the biggest supermarket chains with Rs 15,000 crore turnover.
In November 2014, Future Group company Future Consumer Enterprise Ltd acquired south India-based convenience store chain Nilgiris for nearly Rs 300 crore.
Last year, it acquired Heritage Fresh’s 136 retail stores in Hyderabad, Chennai and Bengaluru.
Future Retail acquired Easy Day after merger with Bharti Retail in May 2015. Future Retail’s flagship brands include Big Bazaar, Fashion at Big Bazaar, and Food Bazaar.