Amazon, plans to acquire Aditya Birla Group’s food and grocery supermarket chain

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Aug 21, 2018,

Amazon, the world’s largest online retailer is planning to acquire Aditya Birla Group’s food and grocery supermarket chain at an enterprise valuation of Rs. 4,500-5,000. For this it is teaming up with Goldman Sachs and homegrown private equity fund Samara Capital to form a consortium to help acquire it Birla’s food business.

Samara and Aditya Birla Retail Ltd, signed an “exclusivity” agreement at the end of June for bilateral negotiations. But Samara, a mid-market India focused fund, reached out to Goldman Sachs and Amazon to join forces.

Goldman Sachs Special Situations Group will be the likely vehicle within the investment bank for this transaction. The trio is planning to float a separate company or special purpose vehicle in which Amazon will pick up a 49 per cent stake as the “strategic partner”. The final structuring exercise is ongoing ahead of a formal announcement at the end of this month or early next month.

As per Indian overseas investment laws, foreign companies can only hold up to 49% in multi-brand retailers but, foreign companies generally overcome this hurdle by creating holding entities in cash-and-carry retailing, where 100 per cent overseas ownership is allowed. These in turn let Indian-owned groups and entrepreneurs run the front-end stores as their franchisees.

If the deal goes through, More will be the second direct investment in India’s brick-and-mortar retail space by Amazon after it picked a 5 per cent stake in September last year in India’s largest listed department store chain Shoppers Stop for Rs. 180 crore. It shook the US grocery sector earlier this year with its unexpected $13.7 billion purchase of Whole Foods.

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