Reliance Industries Ltd (RIL) and Metro AG have reportedly reached an agreement in principle for RIL to purchase Metro AG's cash and carry wholesale India business.
According to a report by the Economic Times, the deal value is expected to be in the range of Rs. 4,500–4,500 crore, which is somewhat lower than what the German wholesaler anticipated. However, the deal is more in line with Reliance's non-binding offer which was made more than two months ago. Reportedly no official contract has yet been signed.
“Metro AG finally decided to sell to an Indian company as they realised that the regulatory environment in India is not favourable for foreign retail companies,” the Economic Times quoted a person familiar with the matter.
Reliance Retail has reportedly omitted the need to submit a binding contract. The deal is being finalised by a core group of senior executives from both companies and is expected to be signed by the end of the month. As per the report, last month, Christoph Kaemper, Executive Vice President for mergers and acquisitions at Metro AG, member of the commercial board, and Chief Compliance Officer visited Mumbai to finalise the deal with the senior executives of Reliance Industries.
The ET report adds that the chief executive officers of the companies who have signed the non-disclosure agreement are not involved in the negotiation process.
“Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and our agreements with the stock exchanges,” the Economic Times quoted a Reliance spokesperson as saying.
Even though India permits 100 per cent foreign direct investment (FDI) on a cash and carry basis in wholesale trade, overseas investment in offline sales has proven to be a contentious subject. In 2003, Metro was reportedly one of the first businesses to enter the market in India.
