Kishore Biyani’s Future Retail and Sunil Mittal’s Bharti Retail decided to merge their retail ventures in an all-stock deal worth Rs 750 crore.
A day after the Aditya Birla Group announced the merger of all its branded apparel businesses into a single entity to create the country’s largest pure-play fashion company, Kishore Biyani’s Future Retail and Sunil Mittal’s Bharti Retail decided to merge their retail ventures in an all-stock deal worth Rs 750 crore to create one of the biggest retail chains with more than 570 stores across the country.
Following the announcement, Future Retail shares soared 12.06% to close at Rs 129.65 on the BSE.
Under the deal structure, approved by the boards of the two companies, the retail business of Future Retail would be merged with Bharti Retail. The combined entity would own the retail operations of both the companies.
In the second step, infrastructure, investments and assets of both the companies would be combined to create a new entity to be called Future Enterprises.
As part of the deal, Bharti Retail would get a 15% stake in both the merged entities. The company would get Rs 500 crore in stocks at present and Rs 250 crore in stocks would be converted at a later date.
“We are merging our retail businesses to create two separate companies… The combined retail entity would have a total turnover of Rs 15,000 crore,” Future Group CEO Kishore Biyani said at a press conference. That compares with Future Retail’s Rs 14,612-crore turnover in FY14.
Future Group promoters would hold 46-47% stake each in the two new entities. Bharti would have representation on their board with one member.
“We are only merging. This was needed for faster growth. It is a strategic fit for both the companies,” Bharti Enterprises vice-chairman Rajan Bharti Mittal said.
Biyani said they plan to open 4,000 smaller-format stores by 2021, up from the total of about 570 stores now.
Bharti’s Easyday chain of stores and Future’s Big Bazaar stores would continue to operate, he added.
Biyani said all new small format stores in North India would be opened under the Easyday brand. In South and West India, stores would be opened under Nilgiris and KB’s brands.
The Bharti Group has been looking for partners for a full-fledged retail play after parting ways with erstwhile cash-and-carry partner Walmart in 2013. The group runs over 210 Easyday stores across different formats, mostly in the northern region. Similarly, Future Group also has been making moves to consolidate its business after selling a majority stake in Pantaloons to Aditya Birla Retail in 2012. It has chains under different formats, including hypermarkets under Big Bazaar and supermarkets under Food Bazaar brand.
As part of the deal, Bharti Retail would issue one equity share of Rs 2 each for every share of Rs 2 held in Future Retail in consideration of the merger of Future’s retail business into it. On the other hand, Future Retail would issue one fully paid-up equity share of Rs 2 each to Bharti Retail shareholders for every share of Rs 2 held in it in relation to the merger of the retail infrastructure business.
The equity shares of Bharti Retail issued to shareholders of Future Retail would be listed on stock exchanges.
As part of the deal, Bharti Retail’s existing holders of optionally convertible debentures (OCDs) aggregating Rs 250 crore will hold OCDs in Bharti Retail as well as Future Retail aggregating to the same amount.