SUMMARY
The acquisition took place through Witzig Advisory Services
CCI has done its due diligence of the deal only from the point of impact on competition
Grocery retail in India is estimated to comprise over 60% of the country’s total retail market
Amid chaos with FDI policy for ecommerce, the Competition Commission of India (CCI) has given a relief to Amazon by approving its acquisition of Aditya Birla Group’s supermarket chain More in a joint bid with private equity (PE) fund Samara Capital.
In September 2018, Amazon and Samara Capital agreed to acquire More from the Aditya Birla Group for a reported deal value between $644.09 Mn (INR 4,500 Cr) – $715.66 Mn (INR 5,000 Cr).
The acquisition took place through Witzig Advisory Services, a subsidiary of Samara in which Amazon is expected to take a 49% stake with the rest being retained by Samara. After the announcement, Witzig filed an application to the CCI for clearance.
CCI has done its due diligence of the deal only from the point of impact on competition, and it’s for the Samara-Amazon JV Witzig to ensure that the deal is in compliance with the revised ecommerce FDI norms issued last month.
CCI on Wednesday had sent a communication to Witzig Advisory Services, the entity where Samara and Amazon will invest, saying that the proposal is “approved”, without elaborating further.
A media report said that a detailed order is expected from CCI soon which may specify certain conditions. However, they are not expecting any major hurdles in that since the ownership and deal structure are not in CCI’s domain directly.
The issues of ownership and deal structure come under the domain of the Department of Industrial Policy and Promotion (DIPP), which notified the new FDI norms for ecommerce marketplaces last month.
Also, it is expected that Samara-Amazon may still have to modify the deal structure to be compliant with the DIPP notification; otherwise, it can risk getting into legal problems, as per reports.
The development comes at the time when revised DIPP norms are expected to make it difficult for Amazon to strengthen the relationship between its India marketplace, Amazon.in, and More supermarkets and use the latter as a seller on its hyperlocal food and grocery platform, Amazon Prime Now. This is because the new FDI norms prohibit group companies from selling on ecommerce marketplaces.
Earlier, reports said that Amazon had already decided to keep a distance from the board and management team of More and, hence, it also did not want a majority holding in Witzig. However, the acquisition is planned to strengthen Amazon Prime Now, where More is a seller.
Grocery retail in India is estimated to comprise over 60% of the country’s total retail market. Analysts peg it anywhere between $400 Bn to $600 Bn at present, with the potential to cross $700 Bn by 2022, according to a report by Wharton School of the University of Pennsylvania.
