Future Retail to pay Rs 273 cr in stock for Heritage Foods’ retail biz

heritageHeritage Foods Ltd said it agreed to sell its food retail business to Future Retail Ltd in return for shares in the Kishore Biyani firm.

The businesses covered by the deal are grocery and food retail, agricultural sourcing, processing and marketing, and bakery.

As part of the deal, Future Retail will issue about 1.80 cr shares to the shareholders of Heritage Foods. At the current market price of Rs 152.65, the shares are worth about Rs 273 cr.

Shareholders of Heritage Foods agreed that they would share with Future Retail any upside that they get from selling the newly issued shares, subject to certain undisclosed conditions.

If Heritage shareholders sell their Future Retail shares for 400-500 cr, the sharing amount would be 50% of the amount received over 400 cr. If the sale proceeds are above 500 cr, they would have to also share 75% of the amount above Rs 500 cr with Future Retail.

“The acquisition is expected to result in synergies in operations of retail business of Future Retail”, said Heritage.

The Heritage Group was founded in the year 1992 by Nara Chandrababu Naidu. The retail business of Heritage Foods includes the popular Heritage store chain of 124 stores in the three key southern cities of Hyderabad, Bangalore and Chennai.

“The consolidation of Heritage small format stores brings us close to customers in the three key metros in South India. Scale plays an important role in retail and this forms part of our strategy to expand our small stores network to around 3000 stores nationally by 2021, to service ad weekly needs of customers, even as Big Bazaar focuses on delivering value and catering to the monthly consumption basket of urban India,” said Kishore Biyani, Chairman & Managing Director, Future Retail Ltd.

The net sales of Heritage Food´s retail business as on March is Rs 109.68 cr and the turnover for FY16 was Rs 629.70 cr.

The time period of completing the acquisition is 6 to 8 months.

Heritage foods Ltd is one of the largest private sector dairy enterprises in Southern India.

It has six-business divisions-Dairy, Retail, Agri, Bakery, Renewable Energy and VetCa under its flagship company Heritage Foods Limited.

Future Retail is the flagship company of Future Group. Headquartered in Mumbai,the company is known for having a significant prominence in Indian retail and fashion sectors, with popular supermarket chains like Big Bazaar and Food Bazaar, lifestyle stores like Brand Factory, Central etc.