Amazon’s Move
● The Singapore International Arbitration Centre has put a stay on the $3.38 billion agreement in response to Amazon’s claim of a breach of contract.
Amazon has moved to block Reliance Retail’s $3.38 billion takeover of Future Group, claiming breach of contract.
NEW DELHI — Like a spurned suitor, Amazon Inc. is putting up a fight to stop the acquisition of the Future Group by Reliance Retail Ventures Ltd., with a legal notice to put a hold on the $3.38 billion deal between the two companies revealed Aug. 30.
An interim order by the Singapore International Arbitration Centre has put a stay on the transaction, in response to Amazon’s claim made earlier this month of a breach of contract. SIAC has asked the Future Group to wait for the final judgment on the plea. The interim order is valid for 90 days and SIAC will issue its final verdict during that period.
The choice of forum is interesting:
SIAC provides a dispute resolution system for cross-border transactions, providing an alternative to the slow and tenuous Indian court procedures.
The deal in question is Reliance
Retail’s 247.13 billion rupee, or $3.38 billion, acquisition of more than 1,700 Future Group stores, a move that is expected to rejig the $850 billion retail industry in India. Reliance has the biggest retail network in the country, with more than 12,000 stores, and the acquisition is expected to give it strength across multiple segments.
In contention is the 49 percent stake Amazon has in Future Coupons Ltd., which owns 7.3 percent of Future
Retail, giving the American web giant an estimated 3.6 percent share of Future Retail and the right to buy into Future Retail after a period of between three and 10 years.
Although it was made clear that the deal between Reliance and Future was reached after consultation with all parties, it appears there are still unresolved issues that are going to — at the very least — delay it. The cross-border forum has added another wrinkle.
In a statement Sunday, Reliance Retail Ventures noted that it had been “informed of an interim order passed by the emergency arbitrator in the arbitration proceedings invoked by Amazon under a shareholders’ agreement with the promoters of Future Group.”
The company was clear that it didn’t intend to back out of the deal, noting that “RRVL intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future Group without any delay.”
Even as Reliance Retail has stressed it aims to complete the acquisition, the question of jurisdiction has become a major factor.
The Future Group in a statement Sunday noted that the legal issues would need to be addressed within India.
“As per the advice received by Future Retail Ltd., all relevant agreements are governed by Indian law and provisions of Indian Arbitration Act for all intents and purposes and this matter raises several fundamental jurisdictional issues which go to the root of the matter.
“Accordingly, this order will have to be tested under the provisions of the Indian Arbitration Act in an appropriate forum. In any enforcement proceedings, FRL would take appropriate steps to ensure that the proposed transaction will proceed unhindered without any delay,” it added.
In addition to throwing up a potential roadblock to the deal, the development Sunday also puts a lid on speculation that Amazon would invest $20 billion in Reliance Retail, making it the strongest power player in Indian retail history.
Since making the deal with the Future Group, Reliance Retail has been on a roll in terms of garnering new investors, including global players like General Atlantic, KKR, Silver Lake, Mubadala, GIC, ADIA and TPG, which have invested a combined total of more than 377 billion rupees, or $5.09 billion, in the group in less than four weeks for an 8.51 percent stake.
Reliance has been consolidating its strength in a number of cross-industry maneuvers, gathering investments of more than $ 20 billion earlier this year in its telecommunications arm Jio and expanding the reach of its online venture JioMart.