Kishore Biyani-led Future Retail Ltd said on Thursday it has agreed to acquire K Raheja Corp group company Hypercity Retail (India) Ltd for Rs 655 crore ($100 million) in a cash-and-stock deal.
Future Retail said in a stock-exchange filing it will pay Rs 155 crore in cash and issue shares worth Rs 500 crore. The company will allot 9.31 million shares at Rs 537 apiece. That’s slightly higher than its closing price of Rs 527.65 on the BSE on Thursday.
The transaction will strengthen Future Retail’s presence in the hypermarket segment.
Hypercity was set up in 2004 and operates 19 hypermarket stores with total area of 1.24 million square feet. The company posted revenue of Rs 1,191 crore in the financial year ended March 2017, up from Rs 1,035 crore the year before.
In a separate filing, K Raheja group company Shoppers Stop Ltd said it will sell its 51.09% stake in Hypercity for Rs 79.18 crore in cash and Rs 255.4 crore in shares of Future Retail. The remaining stake in Hypercity is held by the Raheja family and group companies.
Hypercity’s enterprise value, which includes debt and cash in hand, is Rs 911 crore, Shoppers Stop said.
Mumbai-listed Future Retail also said that the deal will require approvals from stock exchanges and the Competition Commission of India, and that the transaction is likely to be completed in three to five months’ time.
Future Retail is the flagship company of Future Group. Its gets bulk of its revenue from the Big Bazaar chain of hypermarkets and EasyDay supermarkets as well as fashion stores under the fbb brand and food retail chain Foodhall.
The company operated 235 Big Bazaar hypermarkets, 54 fbb outlets and 538 EasyDay stores as of March 2017. It also operated seven Foodhall stores, 30 Ezone electronic outlets and 37 furniture stores under the HomeTown brand, according to an analyst presentation. In total, it operated 901 stores in 240 cities across India.
The acquisition of Hypercity is in line with Future Retail’s plan to expand its chain of hypermarket stores to 350 in three to five years’ time.
Future Group is not new to acquisitions. In November last year, Future Retail acquired the retail and allied businesses of Hyderabad-based Heritage Foods Ltd.
Future Group, the second-biggest brick-and-mortar retailer after billionaire Mukesh Ambani-led Reliance Retail Ltd, had earlier acquired Big Apple, Nilgiri’s and Bharti Retail. It had purchased Nilgiri’s, a south India-based chain, in November 2014.
Biyani made his first acquisition in the e-commerce segment last year by taking over Rocket Internet-backed online furniture and home furnishings store FabFurnish.com in an all-cash deal.