Amazon wins legal battle over Mukesh Ambani’s $ 3.4 billion retail deal

Mukesh Ambani
Image credit: AFP

Amazon.com Inc. has won crucial lawsuit to stop billionaire Mukesh Ambani’s planned $ 3.4 billion purchase of indebted Indian retailer, a big boost to global e-commerce giant’s ambitions to dominate the country’s $ 1 trillion retail market.

A bench of two Indian Supreme Court judges on Friday ruled that an emergency order issued last year by a Singapore arbitrator, which barred Reliance from pursuing the deal, is legally binding. Amazon had seized the arbitral tribunal of the city-state, and the parties will now have to wait for the deliberations of this body before a final decision.

The Indian court verdict is the latest episode in a bitter battle against Cash-strapped Future Retail Ltd., the country’s second-largest supermarket chain, which Jeff Bezos founded Amazon and Ambani’s Reliance Industries Ltd. want to control. The behemoths, owned by two of the world’s richest men, are fighting for a larger share of the one billion-person and consumer market still open to foreign companies.

The highest court also upheld a previous ruling that ordered the assets of Future Group founder Kishore Biyani to be frozen.

Reliance fell 2.1% in Mumbai on Friday, the biggest intraday drop since June 25. Future Retail plunged from its daily limit of 10%, the highest in more than four months.

For Seattle-based Amazon, adding the Future’s Big Bazaar store brand to its assets would help expand its physical presence across the country. Ambani announced plans to buy Future’s assets almost a year ago to help it with its retail push. Its petroleum refining conglomerate has identified e-commerce and conventional retail as two areas of focus and has attracted investors such as Facebook Inc. and Alphabet Inc.’s Google in 2020.

“The court verdict puts a stop to Reliance’s retail dominance in India,” said Devangshu Dutta, founder and CEO of Delhi-based retail consultancy Third Eyesight. “This balances competition with the big US players and gives Amazon a much needed presence in physical retail.”

An Amazon spokesperson said “we hope this will speed up the resolution of the dispute.” A Reliance spokesperson did not immediately comment on the decision.

Future Retail said in an exchange filing on Friday that it would pursue all available legal avenues and remedies to close the deal and protect investors and workers.

Crucial operation

The verdict could spell the end of the Biyani retailer if its plan to sell assets to Reliance fails. Future Retail experienced a severe cash shortage when India was put on hold in March last year to curb the coronavirus outbreak. Lawyers for Future Group argued in the courtroom earlier that the deal is crucial to the retailer’s survival and that an aborted deal can lead to bankruptcy and job losses.

Future Retail’s 5.60% $ 500 million notes in January 2025 plunged 5.7 cents on the dollar to 66.3 at 6:19 p.m. in Hong Kong. This is the lowest level since August 27, according to data compiled by Bloomberg.

The feud highlights the importance of the Indian consumer market. Amazon pledged $ 6.5 billion in investment, while Walmart Inc.-owned Flipkart recently raised $ 3.6 billion in the nation’s largest fundraiser, with a valuation of nearly $ 38 billion. of dollars.

Breach of contract

Amazon has a stake in an unlisted Future unit and has argued that it contractually has the first right of refusal to buy Future. He went to Singapore’s arbitration tribunal last year, accusing Indian retailer Future Group of violating that contract when he agreed to sell its wholesale, warehousing, logistics and other assets to the Ambani conglomerate.

Amazon and Future Group have both consented to the Singapore International Arbitration Center rules while being subject to Indian law, according to Faisal Sherwani, a New Delhi-based partner at law firm L&L Partners.

“In doing so, the parties consciously agreed to an emergency arbitration until the constitution of an arbitral tribunal,” he said. “It’s a lesson in accepting the consequences of your choices.”


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