Amazon, the American e-commerce giant has made an announcement on Monday that it will partner Goldman Sachs, Samara Capital, and a private equity firm. Amazon believes that the partnership will help the company to buy the majority of the stakes in the food and grocery division of Aditya Birla Group which is priced at Rs. 4500- 5000 crores.
Earlier, Samara and Aditya Birla Group have signed an agreement in June for bilateral negotiations. Goldman Sachs special situations group will help Amazon to carry out the acquisition’s transaction. The three companies, i.e. Amazon, Samara Capital, and Goldman Sachs plans to float a separate company or special purpose vehicle in which Amazon will pick up a 49% stake as the strategic partner. By the end of this month or in the first week of September, the final structuring exercise will be announced.
According to India’s investment laws, foreign companies can only have 49% stakes in multi-brand retailers. Though, foreign companies manage to escape this by creating holding entities in cash-and-carry retailing, where 100% overseas ownership is allowed.
If the acquisition is successful, Aditya Birla’s food and grocery division will be the second direct invest by Amazon in brick and mortar retail after Amazon picked 5% stake in Shoppers to stop last September for Rs. 180 crores.
Amazon’s mission to expand its retail and grocery sector in India clashes with Walmart Inc., because Walmart is also seeking to capture India’s fast-growing online retail business.