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Goldman Sachs Exits From Amazon & Samara Capital’s Retail Chain ‘More’ Acquisition Plan

Goldman Sachs Exits From Amazon & Samara Capital’s Retail Chain ‘More’ Acquisition Plan

Samara Capital will acquire a 51% stake in Aditya Birla Retail Ltd while Amazon will hold 49% balance through its investment arm

The duo is expected to acquire Aditya Birla Retail Ltd at an enterprise value of $579.48 Mn- $593.57 Mn

Amazon is in talks to acquire a stake in Future Retail and Spencer’s as well

As the Indian retail and ecommerce landscape comes closer with industry leaders looking for synergies, Amazon and Samara Capital have now taken a step closer to acquire Aditya Birla Group’s food and grocery retail chain More.

Earlier reports surfaced that Goldman Sachs had been a member of the consortium to acquire More. Various reports have now quoted executives to say that investment bank Goldman Sachs is no more participating in the talks.

The duo— Samara Capital and Amazon— are speculated to acquire Kumar Mangalam Birla’s Aditya Birla Retail Ltd (ABRL) at an enterprise value of $579.48 Mn- $593.57 Mn (INR 4,100- 4,200 Cr).

It is being expected that the deal will be completed in the next 10 days, possibly as early as this week.

Notably, the acquisition will effectively wipe out the entire debt in ABRL’s book, which stood at about $565.3 Mn (INR 4000 Cr) as of March 2018. The deal will be through an existing facility management back-end firm.

Reports suggest that Samara Capital will acquire 51% stake in that firm while Amazon will hold the balance 49% through its investment arm.

It is being suggested that since the back-end company, where Samara and Amazon are investing, has no restriction on FDI, there is no problem; which means once the deal is done, ABRL need not take approvals from individual state governments to operate More’s stores.

The reports said that since Amazon wants 49%, which is little short of the permitted 51% in multi-brand retail FDI, there was no space for Goldman in the deal.

What’s In ‘More’ For Amazon?

Despite continuous losses, More is the fourth largest supermarket chain operator in India, and runs 493 supermarkets and 20 hypermarkets under the More brand, covering more than 2 Mn sq ft of retail space, across the country.

However, More lags behind the Future Group, Reliance Retail, and DMart in terms of the number of such outlets.

In FY17, the ABRL reported a 20% increase in sales to $600.52 Mn (INR 4,194 Cr), with net loss narrowing to $92.21 Mn (INR 644 Cr). However, the company had a debt of about $941.14 Mn (INR 6,573 Cr) on its books and financing costs amounted to $67.43Mn (INR 471 Cr) for the year.

After significantly scaling down its operations, More achieved a store-level EBITDA (earnings before interest, taxes, depreciation, and amortisation) breakeven.

More complements Amazon’s plans to venture into food retail in India; the plan has hit a major roadblock due to policy ambiguities, even though Amazon had received in-principle approval to invest $500 Mn in a subsidiary that was allowed to sell locally produced and packaged foodstuff, both online and offline.

Amazon: Looking At Retail In India

At the time when Amazon is already betting on More, the company is also speculated to be in talks with Kishore Biyani’s Future Retail and Spencer’s Retail.

Inc42 had earlier in February reported that Future Group is eyeing a strategic alliance with Amazon. Future Group CEO Kishore Biyani also met Amazon founder Jeff Bezos in the US to initiate the discussions.

For Amazon to acquire 10% stake in Future Retail, it will have to invest about $500 Mn to $600 Mn, which will put the latter’s valuation at about $6 Bn (INR 40,872 Cr) in the market from the current $4 Bn, said the Factor Daily source.

At the same time, talks with Spencer’s on valuation and structure are currently ongoing, however, they are preliminary in nature.

Spencer’s Retail runs 128 stores in over 30 cities. These include 58 large-format, hypermarkets and supermarkets. Its revenue was INR 2,091 Cr in FY18 on a loss of INR 30 Cr loss before tax compared with a loss of INR 129 Cr in the year before.

It is to be noted here that if these three deals— More, Future Retail and Spencer’s— go through, Amazon will have a stake in over 1,700 stores and a mine of data to further its business in India to help it challenge Walmart-Flipkart and Reliance Retail.

[The development was reported by ET.]