FRL's independent directors acting for benefit of promoters, should reconsider Samara offer: Amazon

Amazon has written to the independent directors of Future Retail Ltd FRL alleging that their rejection of an offer by Samara Capital shows that these actions are only for the benefit of the promoters and others involved in the proposed transaction with Reliance, and called upon them to reconsider the offer of assistance for the cash-strapped retailer.

Amazon has written to the independent directors of Future Retail Ltd (FRL) alleging that their rejection of an offer by Samara Capital shows that these actions are only for the benefit of the promoters and others involved in the proposed transaction with Reliance, and called upon them to reconsider the offer of assistance for the cash-strapped retailer. Earlier this week, FRL's independent directors had turned down Amazon's offer of financial support to the company through a deal with private equity firm Samara Capital, saying the offer is ''plainly an attempt to buy the FRL assets on the cheap''. Amazon had told FRL that Samara Capital remains 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 for the private equity fund to conduct expedited due diligence. Amazon and the independent directors have exchanged a number of letters over the past few days. In the latest letter dated January 27, Amazon said the attempt to now question the Samara Term Sheet (signed in June 2020) and the background of Samara ''only demonstrates that your statements are being made at the behest of the Promoters to protect their mala fide action of reneging from the Samara Term Sheet and concluding the Impugned Transaction (with Reliance).'' ''This demonstrates your mala fide actions, which are entirely contrary to the role and functions of independent directors under Indian law,'' Amazon said in its letter, a copy of which was seen by PTI. The US retailer further alleged that it is now clear the independent directors' actions are only for the benefit of the promoters and others involved in the transaction with the Mukesh Dhirubhai Ambani group (Reliance Industries) and not for the benefit of FRL's shareholders, creditors, vendors and employees. Emails sent to Amazon, Future group and Reliance did not elicit a response.

In its letter, Amazon said the transaction with Reliance is for 19 companies of the Future Group (including 6 listed companies), and is ''entirely different'' from the Samara Term Sheet, as signed by Rakesh Biyani for the promoters and FRL. ''Therefore, your assertion that Samara is trying to buy out retail assets of FRL 'on the cheap' is unfounded and baseless,'' the letter said. The e-commerce major has further said any transaction with Samara and supported by Amazon would be compliant with Indian law as any investment will be made through an Indian owned and controlled company. ''We reiterate that the structure of the transaction with Samara (as well as the structure of the transaction in which Amazon invested in FCPL) is similar to the Impugned Transaction involving the constituents of the MDA Group, being Reliance Retail Ventures and Reliance Retail and Lifestyle Fashions,'' said Amazon. In their letter, the independent directors of FRL had questioned the role of Amazon for facilitating the discussion and had said the e-commerce major should act with transparency in matters of funding of an Indian listed company. The independent directors had also highlighted that foreign investment in multi-brand retail is impermissible without government approval and any investment by Samara must be transparent, and not an indirect investment by Amazon contrary to the rules. FRL's independent directors had last week asked Amazon if it was willing to give a long-term loan to avoid default on repayment of Rs 3,500 crore loan due on January 29. Amazon had replied that it was willing to financially assist Future Retail through the Samara Capital deal but the retailer must shelve its Rs 24,713 crore deal with Reliance. On January 25, the independent directors of FRL turned down Amazon's offer and said they will not be assessing any proposals from the e-commerce major ''until an actual solution which meets FRL's capital requirements and addresses concerns of its stakeholders, in a legally-compliant manner, is tabled''. Future and Amazon have been locked in a bitter legal tussle after the US e-commerce giant dragged Future Group to arbitration at the Singapore International Arbitration Centre (SIAC) in October 2020, arguing that FRL had violated 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. Last month, FRL had missed the due date for the payment of Rs 3,494.56 crore to banks and lenders as it could not sell assets due to its ongoing litigation. It has time till the end of this month to make the payment. FRL -- which operates multi-brand retail stores under brands like Big Bazaar, Easyday and Heritage among others -- has also 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.

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