American social media giant Facebook has set up a new entity Jaadhu Holdings LLC to acquire a 9.99% stake in Jio Platforms, the digital arm of Reliance Industries, India’s largest conglomerate by market capitalization.
The California-headquartered company and Mukesh Ambani-owned Reliance announced the deal worth USD 5.7 billion in late April. Under the agreement, Facebook would have an almost 10% stake in Jio Platforms, an umbrella entity under which Reliance has created an eco-system of telecom network, devices, apps, content platforms, and services.
As a submission to seek clearance for the deal from Competition Commission of India (CCI), Facebook and Reliance said Jaadhu Holdings LLC has been set up in Delaware in the United States, local media Economic Times (ET) reported. As a part of the deal, Facebook would invest USD 5.7 billion in Jio Platforms for a non-controlling minority stake and allow Reliance to leverage its chat platform WhatsApp to roll out its e-commerce venture JioMart.
In the statement to CCI, the companies said Jio Platforms, Facebook-owned instant messaging service WhatsApp Inc, and Reliance Retail Ltd will also enter into a separate commercial agreement.
In fact, within a week of announcing the deal, Reliance started offering JioMart services through WhatsApp in select locations. Currently, JioMart is reportedly live in 200 locations, where Reliance is looking to expand its e-grocery service through WhatsApp.
“Jaadhu is an indirect wholly-owned subsidiary of Facebook. Jaadhu is a newly incorporated company formed in March 2020… As on the date of the Notification Form, Jaadhu is not engaged in any business in India or anywhere in the world,” the filing said.
It is to be noted that both companies need to convince CCI that the proposed transaction does not alter the competitive landscape in the country. They told the commission that Facebook and Jio Platforms would continue to operate independently.
“The Proposed Transaction and the Proposed Commercial Arrangement are pro-competitive, benefits consumers, kirana (corner) stores and other small and microlocal Indian businesses, and take forward the vision of digital India,” it said.
They also emphasized on the fact that there is no significant overlap between the two business segments that Facebook and Jio Platforms operate in, which is advertising services and consumer communication applications, respectively, the statement said.