Future Retail of Kishore Biyani has agreed to merge its retail operations with rival Bharti Retail of the Sunil Mittal-led Bharti Group to create one of India’s biggest retail chains with a turnover of over Rs 15,000 crore and more than 570 stores across the country.
The mega retail merger is the second in two days as Aditya Birla Nuvo Ltd (ABNL), controlled by Kumar Mangalam Birla, announced the consolidation of its branded apparels businesses under its listed subsidiary Pantaloons Fashion & Retail Limited (PFRL) to form an entity with a turnover of Rs 5,290 crore on Sunday. ABNL acquired Pantaloons Fashion from the Future Group in 2012.
Under the deal structure, approved by the boards of the two firms, the retail business of Future Retail will be merged with Bharti Retail. The combined entity, which will be known as Future Retail, will own the retail operations of both the firms. In the second step, infrastructure, investments and assets of both the firms will be merged to create a new entity called Future Enterprises.
The merged entity will have over 570 retail stores in 243 cities with operational retail space of over 18.5 million square feet. The firm will operate 203 Big Bazaar and easyday hypermarkets, 197 Food Bazaar and easyday supermarkets, and 171 other stores.
The shareholders of Bharti Retail (BRL) and Future Retail would own shares in the two new firms. “We are merging our retail businesses to create two separate firms. The combined retail entity will have a total turnover of Rs 15,000 crore. There is no overlap in our store presence. We did not have the smaller format stores that Bharti Retail has,” Future Group CEO Kishore Biyani said.
Bharti Retail will issue one equity share of Rs 2 to the equity shareholders of Future Retail (FRL) for every share FRL. Future Retail will issue one equity share of Rs 2 each of FRL to the equity shareholders of BRL for every one share of Rs 2 each of BRL. The existing holders of optionally convertible debentures (OCDs) of BRL aggregating to Rs 250 crore will hold OCDs in BRL and FRL worth Rs 250 crore. Bharti Retail will get about 15 per cent stake in both the entities. Bharti will get Rs 500 crore worth stocks, representing 9-10 per cent equity in both the companies and Rs 250 crore in the form of optionally convertible debentures. Future Group promoters will hold 46-47 per cent stake each in the two new entities and the rest will be held by public shareholders. Both the entities will be listed on the bourses. Bharti Enterprise vice chairman Rajan Bharti Mittal said: “We are only merging. This was needed for faster growth. It is a strategic fit for both the companies. Retail is an evolving sector and it needs economy of scale. Operational efficiency from the deal will create value for both shareholders and customers.”
After merger, Aditya Birla Nuvo rises 12.6%, Pantaloon soars 20%
New Delhi: While the market valuation of just one e-commerce player is more than that of all the listed brick-and-mortar players, the merger of some of the retail players on Sunday and Monday lifted market sentiments. The last fund raising by Flipkart valued the company at over $10 billion (over Rs 60,000 crore).
A day after the Aditya Birla Group announced the merger of Madura Garments and Pantaloon, the share price of Pantaloon and Aditya Birla Nuvo jumped 19.93 per cent and 12.6 per cent, respectively. During the day, shares of Aditya Birla Nuvo climbed 17.68 per cent to Rs 1,847.95. The shares of Future Retail and Bharti Airtel too rose by 12.1 and 3 per cent, respectively. As a result of this rise in their stock prices, the aggregate market cap of the four firms involved in the two M&As rose by Rs 7,840 crore. ENS