As per a report by the Economic Times today, Amazon’s Jeff Bezos may team up with KM Birla to counter Reliance and Walmart in retail. The trio is planning to float a separate company or special purpose vehicle in which Amazon will pick up a 49% stake as the “strategic partner”.
Amazon, the world’s largest online retailer, is teaming up with Goldman Sachs and homegrown private equity fund Samara Capital to form a consortium for the acquisition of Aditya Birla Group’s food and grocery supermarket chain More at an enterprise valuation of Rs 4,500-5,000 crore, people aware of the development said.
The Economic Times had reported in June that Samara and Aditya Birla Retail Ltd, a private company of Kumar Mangalam Birla, signed an “exclusivity” agreement at the end of June for bilateral negotiations. Samara, a mid-market India focussed fund, in turn reached out to Goldman Sachs and Amazon to join forces.
Samara Capital is an entrepreneurially run India focused private equity firm. It invests in Emerging Indian Companies (EICs) – which it defines as those businesses that are poised for rapid transformation due to a strong entrepreneurial minded management team and a favorable external context.
Samara Capital was founded in 2006 by Sumeet Narang and Gautam Gode and is based in Ebene, Mauritius; with additional offices in Mumbai, India and Delhi, India.
Source: Zauba Corp
Goldman Sachs Special Situations Group will be the likely vehicle within the investment bank for this transaction.
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 like More. However, foreign companies generally overcome this hurdle by creating holding entities in cash-and-carry retailing, where 100% 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% stake in September last year in India’s largest listed department store chain Shoppers Stop for Rs 180 crore.
Loss-making More is the fourth-largest supermarket chain operator in India and its takeover would strengthen the Seattle-based ecommerce giant’s food and grocery business presence, especially after rival Walmart Inc. bought out online retailer Flipkart for $16 billion. Amazon’s own plans to start a fully-owned food retailing venture in India has been a nonstarter due to policy ambiguities even after receiving approval to invest $500 million in a subsidiary that was allowed to sell locally produced and packaged foodstuff, both online and offline. Founder Jeff Bezos has already invested about Rs 100 crore ($14 million) in that business (Amazon Retail India Pvt.).