Sri Lankan conglomerate Softlogic's retail holdings wing entered into an agreement on Friday to fully acquire Agora, Bangladesh's first ever and the second largest supermarket chain, according to a public disclosure by the Lankan conglomerate.
The acquisition of 100% stake in the company via a series of transactions would be subject to terms and conditions set out therein and receipt of regulatory approvals, Softlogic Holding PLC said in its regulatory filing in Colombo Stock Exchange.
Neither Softlogic nor Agora owners disclosed the deal value.
Investment banking sources, however, estimate that the amount might be something between Tk181 and Tk249 crore, citing previous events.
Khalid Quadir, chief executive officer and founding partner of Brummer & Partners (Bangladesh), which manages the first Bangladesh-focused private equity fund, Frontier Fund that now owns 72% of Agora, declined to disclose any number right now.
"Our investments over a decade ago helped the business and the sector in Bangladesh grow and due to the nature of international private equity investment, we have to exit now," he said.
Softlogic has a very strong track record and expertise in the fields of ICT, healthcare, retail, financial services, automobile and leisure industries.
Khalid Quadir hopes that they will add significant value to the retail chain business in the coming days.
The buyer firm Softlogic Retail Holdings' operations include branded apparel, consumer electronics, mobile handset and distribution, supermarkets and quick service restaurants.
Agora: The pioneering supermarket
To offer hassle-free modern grocery shopping experience to the burgeoning upper middle class in the capital, Rahimafrooz, one of the oldest corporate houses of the country, opened the first supermarket outlet of Agora in the then Rifles Square, later named Shimanto Square, in 2001.
In the following year, Gemcon Group opened its first supermarket Meena Bazaar at a nearby location in Dhanmondi.
They, along with some other players including Nandan, were mainly catering to the affluent early adopters in buying daily essentials from a single store under the same roof. Supermarkets' main appeal also used to include the diversity in products on shelves.
In 2008, ACI entered the industry with a big buzz aiming to make super shops a common peoples' destination.
Aggressively investing in lots of new stores, ACI's supermarket chain Shwapno succeeded in its mission to a fair extent and became the market leader by far as the average urban consumers began to go there.
Shwapno already opened 207 stores, 55 are large superstores and the remainder are being run by franchisees across the country.
To keep pace with the industry, Agora welcomed its new investor Frontier Fund in 2009, which began with a 49% stake in the company.
Following gradual investments, the foreign private equity investor turned majority shareholder of Agora and now needs to exit like what it is doing in the case of other portfolio companies, including two-wheeler manufacturer Runner Automobiles.
Agora, by now, has 18 superstores of various sizes in Bangladesh - 15 in Dhaka, two in Sylhet and one in Chattogram to offer everything the busy people need in their kitchen.
With an estimated annual turnover of around Tk500 crore, Agora is the second largest player in the industry, while Meena Bazaar with 15 superstores is breathing down its neck.
Also, Pran-RFL venture Daily Shopping with their convenient store model has had over 50 smaller chain stores.
Hypermarket chain Unimart, supermarket chains Princebazar, Lavender and many new entrants are growing in their own market base with a much smaller number of stores.
Zakir Hossain, general secretary at the Bangladesh Supermarket Owners Association, said chains, which are members of his association, are now operating over 300 superstores in the country, while many more modern retail stores have grown outside the association's purview.
Shwapno Executive Director Sabbir Hasan Nasir said that including non-chain superstores, the total number across the country might have crossed 1,000 already.
Modern retail still scratching surface in Bangladesh
"The industry is bound to grow," said association leader Zakir Hossain while explaining the increasing demand for supermarkets.
Changing lifestyle is not allowing an increasing number of urban people to take all the hassles in traditional wet markets as they do not feel like bargaining, or rechecking the product quality amid a tight schedule.
In the first half of the previous decade, the industry grew at an annualised rate of 35%, but a discriminatory value added tax (VAT) on packaged items bought from supermarkets slowed down the growth to an average of 25% in the second half of the 2010s.
During hardship, the supermarket sector's growth is coming down to single digits often nowadays, according to him, as the middle-class are not happy with the extra VAT in superstores, which they do not need to pay in neighbourhood stores.
Like all other regional peer economies, Bangladesh also began to attract investments in supermarket chains two decades ago. But here it is still scratching the surface, while in Sri Lanka, Indonesia, Thailand, the modern stores almost ascended to be synonymous to retailing.
Sabbir Hasan Nasir said modern retailers, including the non-chain ones, in the country are generating an annual turnover amounting to around Tk3,000-Tk3,500 crore.
Shaheen Khan, CEO of Meena Bazaar, said modern retail is still not more than 2% of the national retail figure, while by now, Sri Lankan superstores are contributing to over 42% of the country's annual retail turnover, and it is even higher in many other peer economies in the region.
Sabbir Hasan Nasir said the industry's repeated requests for a level-playing field with the wet markets remained ignored; that is why the industry is still way behind its potential.
Meena Bazar's Shaheen Khan said the discriminatory VAT, the excessive tax on capital machinery a supermarket needs must be rationalised.
Zakir Hossain said when the Bangladesh Food Safety Authority Act was enacted in 2013 and the authority formed in 2015, investors thought that it would boost modern retailing as unhygienic slaughtering, unhygienic handling of other food items should be banned. But nothing changed in reality.
Since Bangladeshis' per-capita income crossed $2,000, modern retailing has all the right reasons to flourish a lot as many customers would prefer the convenience, traceability and assurance it offers, said each of the industry people.
The successful Sri Lankan investor must have analysed the potential of the sector, Zakir Hossain said.
"Now it would depend on the government whether it wants the needed takeoff of modern retailing or not." He added.
What happened to the Agora-Meena Bazaar Deal?
Asked on Saturday, neither the Meena Bazaar nor Agora authorities clearly said what happened to their deal on the table two years back regarding Meena Bazar's interest to acquire Agora.
According to the Bangladesh Bank sources, before the pandemic, Meena Bazaar entered into an agreement with Agora owners to acquire its larger competitor for Tk249 crore.
But the deal value needed to be approved by the Bangladesh Bank, as Agora was not a publicly traded company and the sheer part of the sales proceeds would be remitted abroad.
The central bank approved a price of Tk181 crore for 100% Agora shares, as it has some set valuation methods to follow.
But the Agora investors were not happy with the price dictated by the central bank and looked for a foreign buyer, which might help them avert the central bank interference.