Amazon Can Ask Regulators To Block Deal With Future Group: High Court
Court's position neither bars nor allows Future-Reliance transaction Reliance is already the country's biggest brick-and-mortar retailer Acquiring Future assets would give it unparalleled edge over rivals
The Delhi High Court allowed Amazon.com Inc.. to oppose Future Group's $3.4-billion asset sale to Mukesh Ambani's conglomerate but left it to domestic regulators to decide on the deal, in a mixed ruling for the US giant fighting Asia's richest man for dominance in one of the world's largest retail markets.
The court said Monday it can't bar the e-commerce giant from writing to regulators objecting to the indebted Indian retailer's plan to sell its assets to Mr Ambani's Reliance Industries Ltd. The ruling by a single-judge bench can be challenged before a higher court. The court's position neither bars nor allows the Future-Reliance transaction.
The legal spat has drawn the battle lines between two of the world's richest men, Jeff Bezos and Mr Ambani, as they fight to control India's estimated $1-trillion retail market. Reliance is already the country's biggest brick-and-mortar retailer. Acquiring Future's assets would give it unparalleled edge over rivals -- an advantage Amazon is not willing to cede. For the distressed Future Group, the asset sale is a crucial bailout deal.
While Amazon has been allowed to petition Indian regulators against this transaction, recent experience shows it may not always be fruitful. Despite writing to the local antitrust regulator asking it not to approve the takeover by Reliance until arbitration proceedings are complete, the agency approved the transaction on November 20.
The American company also suffered a setback with the court saying that its investment into the Future Group required government approval and not securing it violated India's foreign exchange and investment laws.
Future Retail Ltd.'s shares jumped as much as 5 per cent on Monday in Mumbai while Reliance gained 1.5 per cent.
Future approached the court last month after Amazon got a Singapore arbitration panel to temporarily halt the transaction on October 25. The US firm, which owns a minority stake in one of Future's unlisted firms, accused Future Group of breaching a contract by agreeing to a buyout by Reliance.
The Delhi High Court said Monday that the emergency arbitration on Amazon's plea was valid but stopped short of commenting on the legal validity of the arbitration verdict.
Reliance said on October 26 that it intends to purchase Future Retail's assets "without any delay," notwithstanding the arbitration court order. Future Group, controlled by tycoon Kishore Biyani, had said the matter "will have to be tested" under laws.
Harish Salve, the lawyer representing listed flagship Future Retail Ltd., urged the court on November 10 to bar Amazon from writing letters to local antitrust and market regulators in its continued efforts to block the deal with Reliance. Amazon's counsel argued that Future's petition was not legally tenable.
The Future group is critically dependent on the asset sale going through. It defaulted on obligations earlier this year. Future Retail has posted losses for three straight quarters and reported a 74 per cent revenue drop in the latest quarter.
The retailer will run into serious financial trouble if the asset sale fails, its lawyer Mr Salve told the court on November 10, arguing that the emergency arbitration ruling was not binding in the country. Amazon wants to "sink the ship" by not letting Reliance acquire Future' assets, he said.
