ASIA – Amazon, together with the India-focused private equity firm, Samara Capital have signed a deal to acquire Aditya Birla Group’s food and grocery store, More for US$584.26 million.
According to two senior industry executives cited by ET Retail to be familiar with the matter, the deal was reached after the board of Aditya Birla Retail Ltd (ABRL) agreed to the sale of the entity.
Samara acquired majority 51% in ABRL while Amazon’s investment arm, Amazon.com NV Investment Holdings LLC, the balance 49%.
The deal which awaits clearance from the Competition Commission of India (CCI) will grant the two the right to operate 575 More stores currently owned by ABRL, the retail arm of Aditya Birla Group company.
India allows 51% FDI in multi-brand retail, while 100% FDI is allowed in cash-and-carry wholesale ventures that sell grocery and other products to business entities such as neighbourhood stores.
Amazon will continue the marketplace model for its online food and grocery sales since India does not allow overseas investment in inventory-based ecommerce.
“Since the back-end company where Samara and Amazon are investing has no restriction on FDI (foreign direct investment), there is no problem,” one of the executives said.
“That is, ABRL need not take approvals from individual state governments to operate More stores, which is a requirement under multi-brand retail FDI.”
ABRL, the fourth largest supermarket chain in the country after Future Group’s Big Bazaar, Reliance Retail and DMart may use the proceeds to pay its debt which stands at US$556.6 million as of March 2018.
The combined entity is planning to set up 100-150 stores every year, mostly neighbourhood supermarkets and a few hypermarkets and for the current year, they are targeting 90 stores.
The sales target of More for 2018-19 is growth of about 15% to touch around US$703.01 million.
Samara Capital which had earlier signed an ‘exclusivity’ agreement with ABRL in June was reported to be holding negotiations with both Amazon and Goldman Sachs to form a consortium to acquire ABRL, but the latter exited the consortium.
More stores would be critical for Amazon’s omni-channel strategy which is intended to widen and deepen its footprint in food and grocery retail through its platform, Amazon Prime Now.
More will become the second direct investment for Amazon in India’s retail space after it acquired 5% stake in Shoppers Stop for US$25.05 million in September last year.