What Future Group Minority Shareholders Get From Reliance Deal

Kishore Biyani’s Future Enterprises Ltd. will reorganise its business as part of the deal to sell its retail, wholesale, logistics and warehousing assets to Reliance Industries Ltd. at a value of Rs 27,513 crore.

The transaction will take place after the merger of key Future Group companies with Future Enterprises Ltd., according to a company filing with the stock exchanges. Under the scheme of amalgamation:

Future Enterprises will issue:

• 9 shares for every 10 shares in Future Consumer.

• 116 shares for 10 shares in Future Lifestyle Fashions.

• 101 shares for 10 shares of Future Retail.

• 131 shares for 10 shares in Future Supply Chain.

• 18 shares for 10 shares held in Future Market Network.
  
  Based on the swap ratio and current market price, shareholders of Future Consumer, Future Lifestyle Fashion, Future Supply Chain, Future Retail and Future Market Network get a premium of 36-75%

While on paper shareholders of all Future Group entities stand to gain, much depends on how the Future Enterprises stock moves in the next few days and weeks. One possible negative can be private group companies with high debt and negative net worth merging with Future Enterprises.

Future Enterprises stock will start pricing in the debt on books and the low scalability of the remaining business after sale of the prime assets to the Reliance Group, said one market participant who didn’t want to be identified.

According to Abhimanyu Sofat, head of research at IIFL Securities, since Reliance is also taking stake in the company post slump sale in remaining business, this will be comforting for Bank of India, State Bank of India, Axis Bank, Canara Bank and RBL Bank, lenders to Future Group entities. A slump sale—when a business is sold for a lump sum without assigning values to its parts—also means no open offer for minority shareholders, which may disappoint some investors, he said.