Recently, we reported that Amazon is talking with BigBasket for a potential acquisition. Now, after holding prolonged discussions, BigBasket and Amazon have entered into a 60 day exclusivity agreement.
As per the people aware of the development, during the agreement period, the e-grocer cannot engage with another party for a potential sale. Signing the exclusivity clause will mean Amazon is the only strategic contender to buy BigBasket during the two-month period.
Reports suggests that BigBasket had mandated Morgan Stanley for a $150 million fund-raise, which was expected to close by April. But, it seems that the funding round is not going through, and thus, BigBasket went back to the table with Amazon and signed the exclusivity agreement.
A source aware of the matter, said to ET,
Typically in M&A deals, exclusivity periods extend to about 30 days so it’s clear there’s only one interested party to buy BigBasket presently. For BigBasket a sale to Amazon will give them a cash exit even if some part comes through in Amazon stock as they are a listed entity.
However, the exclusivity agreement does not stop the online grocery player from pursuing financial investors to raise more capital in the company. Sources suggests that after due diligence, it is not certain if Amazon will go ahead with the final deal. Hence, BigBasket has been on a lookout for fresh capital parallelly.
If the deal goes through, it will entail a 100% sale of the five- year-old Bengaluru based company founded by Hari Menon, VS Sudhakar, Vipul Parekh, VS Ramesh and Abhinay Choudhari. They earlier founded Fabmart.com which was sold off to the Aditya Birla group in 2003.
It will add to Amazon’s technology and overall e-commerce prowess to corner the hugely untapped grocery and food market in India, which is estimated at $400 billion. For Amazon, the acquisition is to create a supply chain and back end, which is needed to grow this vertical.
Valued at $450 million in its last round of funding, reports suggests that BigBasket has been pushing for a sale price of around $700 million which has been a roadblock to the transaction closing. But, a source aware of the development suggests that the final value will only be decided once the diligence is completed successfully.
Earlier this year, we reported that two of the largest players in the online grocery space — BigBasket and Grofers – backed by SoftBank, were in talks for a potential merger. However, the talks fell through and didn’t materialize.
Amazon has proposed a $500 million investment to make entry into the Indian food and grocery business and is awaiting the government’s nod to roll out its plan. Earlier this week, it was revealed that the government will soon clear Amazon’s proposed investment in retail of food products in India.