Future Retail to pay Rs 500 cr in stock, 155 cr cash for Hypercity

Future Retail will pay most of the cost of its proposed Hypercity acquisition by issuing new shares, and only about a fourth will be paid in cash.

The deal will put even more distance between Future, which operates chains such as Big Bazaar and Central, and other players in India’s organized retail market.

Hypercity is positioned above Big Bazaar and is considered slightly more premium than Big Bazaar, with prices not quite as low. Most of the Hypercity outlets are in Mumbai and Bangalore.

Out of the total consideration of Rs 655 cr to paid to 15 shareholders of Hypercity Retail India Ltd, Rs 500 cr would be in the form of Future Retail shares.

The remaining Rs 155 cr would be paid in cash.

The enterprise value of Hypercity, which includes debt on the company’s balance sheet, has been taken as Rs 911 cr, Shoppers Stop said.

At present, only a non-binding agreement has been signed between the two parties and a “definitive share purchase agreement” shall be executed by and between all the shareholders in due course, the companies said.

A total of 9.31 mln new shares of Future Retail will be issued for the purpose, which would increase the total shares outstanding in Future Retail by 1.9%.

The shares are being issued at a valuation of Rs 537 each, 1.9% higher than their closing price yesterday.

51% of the consideration would go to Shoppers Stop — the main shareholder in Hypercity. This would include Rs 79 cr in cash and 4.76 mln shares of Future Retail.

“The Board has approved the Proposed Transaction and the above-referred preferential allotment subject to the execution of definitive agreement (which parties are Working towards) and further subject to receipt of approval of shareholders and applicable regulatory approvals,” said the Kishore Biyani-promoted firm.

A meeting of the shareholders of Future Retail has been called on Nov 3 to consider the deal.

Hypercity had a turn over of Rs 1,191 cr in the year ended March. However, the company had a net worth of just Rs 11.45 cr.