CCI approves Flipkart-Aditya Birla Fashion acquisition deal
The Competition Commission of India (CCI) on 20th January, 2021 has approved a proposal from e-commerce retailer Flipkart to acquire a minority share in Aditya Birla Fashion and Retail Ltd (ABFRL).
As per the deal, Walmart-owned Flipkart will acquire a 7.8% stake in ABFRL, through its wholly-owned subsidiary Flipkart Investments Private Ltd (FIPL).
The Flipkart-ABFRL acquisition deal, announced in October 2020, will certainly provide capital boost to Aditya Birla Fashion Retail Ltd., at a time when the pandemic kept its stores closed and offices shut for most of last year.
The ABFRL operates Pantaloons and is the owner of office-wear brands such as Allen Solly and Peter England. Completion of the deal is subject to fulfilment of customary conditions.
Flipkart in its stock exchange filing said: "In addition to approval of shareholders by way of Postal Ballot (received on 22ndNovember 2020), the issue was subject to regulatory approvals and completion of customary closing conditions under the Investment Agreement."
ABFRL, which consist of wide network of three thousand four stores, devised strategies to use the funds to strengthen its balance sheet, scaling up existing businesses and increase its presence in emerging high-growth categories such as innerwear, athleisure, casual and ethnic wear.
The Flipkart Group CEO Kalyan Krishnamurthy said while announcing the deal: "Through this transaction with ABFRL, we will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country".
Flipkart's move to acquire stakes in offline fashion retailers is part of its broader strategy of expanding operations and leveraging strategic partnerships to keep cost structures keep in an increasingly competitive environment. In July 2020, Flipkart Group had acquired a significant minority stake in Arvind Fashions' subsidiary Arvind Youth Brands for Rs. 260 crore.
In this regard, the CCI has accorded its approval to Flipkart Investment Private Ltd for its proposed acquisition of 7.8 per cent equity stake in the company on a fully diluted basis vide its approval letter dated 20 January 2021.
Additionally, Flipkart will work closely with the company for sales and distribution of its brands. Proceeds from this deal will significantly assist ABFRL to lower its debt, as well as expand operations into new apparel categories.