Urging the BSE and NSE to go ahead with the processing of the application of Future Retail’s proposed buyout by Reliance Retail Ventures Ltd (RRVL), Future Retail has told the exchanges that it is in deep financial trouble and the deal with Reliance Industries-led RRVL is the only rescue route for the debt-laden company.
In a regulatory filing, Future Retail Ltd (FRL) urged the exchanges not to take cognizance of Amazon’s recent letter to them and the Singapore-based arbitration court’s interim order.
Just a week ago, an emergency arbitrator in Singapore directed a temporary stay on the proposed acquisition of Future Retail’s assets by Reliance Retail.
“FRL is undergoing serious financial difficulties, particularly in light of the unprecedented impact of the Covid pandemic; the proposed scheme is the only way, it can come out of the situation,” it said.
It also said that FRL has complied with all the requirements of obtaining the requisite approval from Future Coupons Private Ltd, as was required in the Shareholders Agreement executed by FRL with its promoters.
The company further said that the scheme is in the best interest of all stakeholders, that includes shareholders, financial institutions, vendors and suppliers, and more importantly employees, among others and any delay in its implementation will cause irreparable losses to all stakeholders.
Future Retail further said that the arbitrator’s order does not restrict market regulator SEBI or the exchanges from considering the scheme and approving the scheme.
It said that the arbitrator’s order accepted Amazon’s contention that two separate shareholder agreements, one between Amazon and FRL’s promoters (to which FRL is not a party) and another between FRL and its promoter (to which Amazon is not a party) constitute one single integrated transaction and that by such a composite transaction, Amazon has an interest in and rights against FRL.
“This contention raised by Amazon is entirely misconceived,” it said.
Future said that, at best, Amazon’s claims are a contractual dispute between Amazon and the promoters of FRL, and Amazon has already initiated arbitration for the same.
It said that SEBI and the stock exchanges should consider the scheme independently on its merits, and as per SEBI regulations.
According to the company, a contractual dispute between the promoters of FRL and Amazon cannot restrict or interfere with the authority of the SEBI and the stock exchanges to approve the scheme involving the listed entity. The emergency arbitrator’s order cannot and does not in any manner restrict the SEBI or the stock exchanges from considering and approving the scheme.
“FRL therefore respectfully prays that BSE and NSE should continue to process our application for issuance of observation letter/no-objection letter permitting the captioned Scheme to be filed before the NCLT,” it said.
On Amazon’s contention of integrated agreement, Future Retail said that if the two separate agreements were treated as a single integrated transaction by which Amazon obtained an interest in and rights against FRL, then in 2019, when the agreements were executed, there would have been a change in control of FRL in favour of Amazon, requiring it to make an open offer to FRL’s public shareholders in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
“No such open offer was made, thereby suggesting that there was no intent of Amazon to consider the two agreements as a single integrated transaction at that point of time,” it said.
It noted that given that the order is premised on violation of SEBI Regulations, it cannot and ought not to be accorded any sanctity by the SEBI, the NSE and the BSE.