New Delhi, November 14, : .The Independent Directors of Future Retail wrote to the Competition Commission of India to state that Amazon’s representations in its application for approval were totally contrary to their internal correspondences and notes submitted to the courts. “We, as independent directors of Future Retail Limited (FRL), have inspected and examined the pre-contractual negotiation related records in connection with Amazon’s investment in Future Coupons Private Limited (FCPL) which has been recently come to FRL’s knowledge as part of court filing,” the letter to CCI Chairman Ashok Kumar Gupta said.”We, Future Retail Limited (FRL), as independent directors have inspected and reviewed the pre-contractual negotiations related records in relation to Amazon’s investment into Future Coupons Private Limited(FCPL), which was recently made public by FRL as part of a court filing,” said Ashok Kumar Gupta in a letter to CCI Chairman Ashok Kumar Gupta.
“In the above facts and circumstances, it is evident that Amazon has obtained CCI approval by making deliberate misrepresentations and by actively misleading the CCI.”In the above facts, it is clear that Amazon obtained CCI approval through making deliberate misrepresentations as well as actively misleading the CCI.Amazon should have made true representations conforming to its internal records and obtained approval for the transaction they proposed to make i.e.Amazon should have presented true representations that were consistent with its internal records to obtain approval for the proposed transaction.acquisition of strategic rights over FRL and obtained approval for the same.Acquisition of strategic rights over FRL.Approval for the same.It is our duty as independent directors of FRL to bring the above to your notice.As independent directors of FRL, it is our duty to bring all the above to your attention.
In the teeth of the above, the CCI has to revoke the approval granted for Amazon’s investment in FCPL,” the independent directors said.The independent directors stated that the CCI must revoke its approval for Amazon’s investment into FCPL because of the above.
The letter says that due to Amazon’s concerns arising out of Press Note 2 (PN2), the investment structure was changed to Amazon investing in a twin-entity investment structure i.e.According to the letter, Amazon was concerned about Press Note 2 (PN2) and so the investment structure was modified to allow Amazon to invest in twin-entity structures.Amazon would invest in FCPL and FCPL will acquire 9.82 per cent of FRL.Amazon will invest in FCPL, and FCPL will purchase 9.82 percent of FRL.
Evidence of this is contained in Annexure 2, an e-mail dated 19-07-2019 from Rakesh Bakshi, Head, Legal and Assistant General Counsel, Amazon India to Jeff Bezos, CEO of Amazon.Annexure 2 is evidence of this.It’s an e-mail from Rakesh Bakshi (Head, Legal and Assistant General Counsel at Amazon India) to Jeff Bezos.This was dated 19 July 2019, and contains evidence.
Amazon’s representation that Amazon does not have any direct or indirect shareholding in FRL is contradicted by their own internal records.Amazon’s claim that it does not hold any shareholding in FRL, is contradicted internally.
The email addressed to the CEO of Amazon said: “.The number of equity shares of Future Retail to be held by Future Coupons has been calculated such that Amazon can indirectly hold the same number of shares of Future Retail that Amazon would have acquired if Amazon had directly invested Rs 14 billion in Future Retail at a price per share representing a 25 per cent premium on the minimum regulatory price prescribed for issuance of fresh shares of a listed entity under Indian law.The email to Amazon’s CEO stated: “.Amazon can indirectly hold the same number shares of Future Retail as Amazon would if it had invested Rs 14 Billion directly in Future Retail.Future Coupons paid 25 percent more than the minimum regulatory price for the issuance of new shares of an Indian listed entity.In summary, Amazon is paying a premium of 25 per cent (Rs 2.8 B i.e $41M at current exchange rates) over the regulatory price of the securities of Future Retail.Amazon is paying a premium 25 percent (Rs.2.8 billion, or $41M at the current exchange rates) to the Future Retail securities’ regulatory price.This premium is being paid on account of the strategic rights.”.This premium is paid in consideration of strategic rights.
In the CCI application, it was represented that FCPL’s unique business model holds a strong potential for long term value creation and providing returns on Amazon’s investment.
CCI applications showed that FCPL’s unique model of business creation has the potential to create long-term value and provide returns on Amazon’s investments.But the above representation is not borne out from Amazon’s internal records.
However, Amazon’s internal records do not support the above assertion.
The email to the CEO, Jeff Bezos analyses FRL’s business and operations.
Jeff Bezos, the CEO of FRL, sent an email that analyzed FRL’s operations and business.There is only one sentence on what is FCPL’s business.
Only one sentence is given about FCPL’s business.(c) The price which has been paid for the FCPL shares has been determined by Amazon on the basis of FRL’s valuation as is clearly set out in the email.
(c) Amazon determined the price paid for FCPL shares based on FRL’s valuation, as clearly stated in the email.There is no valuation ascribed or carried for FCPL business per se.The FCPL business is not subject to any valuation.FCPL is just used as a vehicle for an investment in FRL, the letter said.
The letter stated that FCPL is used only as a vehicle to invest in FRL.
As per Amazon, they have paid a premium over their perceived valuation of FRL to acquire strategic rights over FRL: “In summary, Amazon is paying a premium of 25 per cent (Rs 2.8B i.e ~$41MM at current exchange rates) over the regulatory price of the securities of Future Retail.Amazon claims that they paid a premium for FRL’s perceived value to acquire strategic rights.This premium is being paid on account of the strategic rights.
This premium is due to the strategic rights.Due to the Call Option and the strategic rights being at or above the prevailing market price, we currently estimate a $41MM P&L loss at sign.”.We currently project a $41MM P&L loss due to the Call Option and strategic rights being at or above prevailing market prices.
Inspite of the fact that in their mind, the rights acquired by Amazon over FRL were strategic, Amazon has chosen to represent these rights as ‘investment protection rights’ to CCI, the letter said.The letter stated that Amazon had chosen to refer to these rights as ‘investment rights’ to CCI despite the fact that they considered the FRL rights to be strategic.
Amazon’s representation that FRL SHA was negotiated by the Promoters, FRL and FCPL, independent of the investment by Amazon in FCPL is not supported by their internal records.Amazon’s claim that FRL SHA was negotiated between the Promoters, FRL, and FCPL independent of Amazon’s investment in FCPL is unsupported by their internal records.
san/pgh #Retail #Amazon #FCPL #Delhi
