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Amazon Asks India Court to Block $3.4B Retail Megamerger

Amazon is still clinging to the hope that India will be able to thwart the merger of two of the nation’s biggest retail operations.

The e-commerce giant petitioned an Indian court to block Future Group’s $3.4 billion deal to sell its retail, logistics and warehouse assets to Reliance Retail, and to even detain Future’s founder and seize his assets for violation of a Singaporean court order, according to a Reuters report.

The deal would give Reliance, which already operates 12,200 stores across India, another 1,800 brick-and-mortar stores, including Future’s Big Bazaar, Central and Foodhall banners.

Amazon, which has held a minority stake in Future Group’s Future Retail Limited (FRL) since late 2019, is trying to grow its own presence in India, and a deal would certainly be a blow to its ability to become a market leader in the nation of 1.37 billion people. With India’s e-commerce sector anticipated to be worth nearly $72 billion over the next two years, per eMarketer, there will continue to be a fierce battle among Reliance-Future, Amazon and Walmart-owned Flipkart as businesses try to capitalize on a burgeoning pool of online shoppers                               .

Amazon alleges that its initial $200 million investment in FRL (Amazon owns 4.8 percent of the company as of Sept. 30) included clauses saying the Indian group couldn’t sell its retail assets to anyone on a “restricted persons” list including Reliance Industries CEO Mukesh Ambani, India’s richest person. The deal specified any disputes would be arbitrated under Singapore International Arbitration Centre rules.

On Oct. 25, Amazon won an injunction from a Singapore an arbitrator that would prevent FRL from selling its retail, wholesale and logistics businesses to Reliance. But even with the injunction in place, FRL argued that the arbitrator’s order was not enforceable under Indian law and not binding on the company and needed to be ratified by an Indian court.

That assertion appeared to have been proven right once the Competition Commission of India (CCI) offered regulatory approval to the deal in November.

Amazon argued that Future “deliberately and maliciously” disobeyed the arbitrator’s order without challenging it, instead asking the High Court of Delhi to enforce the Singapore arbitrator’s decision, which Amazon and Future had agreed to use in case of disputes, the court filing showed.

Any violation of the arbitrator order invites the “same consequences” as a violation of an Indian court order would, Amazon argued, urging the court to also imprison Future Group CEO Kishore Biyani, and some other respondents in the case, in a civil prison.

The High Court will hear the matter on Jan. 28.

FRL had petitioned the same court in November, urging it to bar Amazon from meddling in its asset sale by writing to local regulators.

In a statement to the BSE and NSE stock exchanges, FRL said it is aware of the petition filed by Amazon and will defend itself. Both Indian stock exchanges gave the go-ahead to the Reliance/Future deal earlier this month, after communicating with India’s markets regulator, the Securities and Exchange Board of India (SEBI).

Reliance Retail already is a legitimate powerhouse in India, also launching an online grocery store called JioMart last year, which both drew investments from Alphabet and Facebook. The company has believers in the U.S. with deep pockets, receiving a $1 billion investment from private equity firm Silver Lake in May and then procuring $750 million in funding from investment firm KKR & Co.

The company had a revenue downturn in the third quarter as it transferred its fuel business to a joint venture between parent company Reliance Industries and BP and continues to convert its Reliance Market stores to fulfillment centers. Revenues declined 7.9 percent in the quarter to $5.2 billion. But overall, Reliance Retail has been reeling in the cash, seeing EBITDA increase 54 percent to $422 million and net profit jump 88 percent to $250 million. The business opened 327 stores in the quarter.

Despite the present scuffle, Amazon has continued to make strides in India. In its third quarter alone, the company expanded its operations network in the country with 10 new fulfillment centers, five new sortation centers, nearly 200 delivery stations and over 100,000 seasonal jobs to help meet customer demand.

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