Startup

Flipkart Approves $15 Billion Deal With Walmart, Know About It

After months of negotiations and discussions, Flipkart’s board has approved an agreement to sell close to 75% stakes of the Indian e-commerce company to a group led by Walmart. The deal was approved at approximately $15 billion, which is one of the biggest acquisitions in India and is expected to shake up the Indian e-commerce industry, as per Bloomberg reports.

The deal will go through later this month, but terms could change and a deal isn’t certain. Getting the Flipkart board approval was perhaps the biggest internal hurdle and now it remains to be seen whether the deal meets regulatory clearance, if any is required.

Flipkart has also bought back $350 million worth of shares from its investors as it seeks to convert its Singapore-incorporated company to a private limited firm, in a move that could ease the way in for a new strategic investor.

ALSO READ: Google’s Parent Alphabet May Participate In Flipkart-Walmart Deal

What are the key factors of the deal?

SoftBank Group will be selling all of its stakes at a valuation of roughly $20 billion. Softbank held over 20% of Flipkart with a $2.5 billion investment, and stands to make over $4 billion through this exit.
Alphabet, the Google parent company, is likely to participate in the investment along with Walmart. The deal will go through later this month, but terms could change and a deal isn’t certain.
Amazon had made a formal offer to buy a 60 percent stake in Indian online retailer Flipkart. The e-commerce behemoth was willing to offer a $ 2 billion break-up fee had Flipkart decided to enter the deal and it fell through for some reason. In fact, this is the very reason that Flipkart’s board chose Walmart, as selling to the US retail giant would be easier in terms of regulatory clearance. As of now, Amazon has no chances of any deal with Flipkart; not unless Walmart faces some unforeseen trouble.
Flipkart’s existing shareholders Tencent, Naspers, and Microsoft are expected to retain small stakes.
Flipkart’s co-founder and chairman, Sachin Bansal is likely to quit the company board as Walmart, the world’s largest retail chain, nears a deal to pick up a majority stake in Flipkart.
Tiger Global Management’s Lee Fixel will remain on the board of Flipkart even after Walmart takes a majority stake in the company. Tiger Global will continue to hold 5% stake in the company.

Walmart is currently running cash-and-carry retail operations for shopkeepers and other sellers, but it would have had a tough run of it had it entered the consumer retail space by itself.

By acquiring Flipkart, Walmart begins its India journey ahead of Amazon, while in the US it struggled to keep up with Amazon’s disruption.

Jeff Bezos-led Amazon has invested over $5 billion already in India and plans to double that in the next few years. But Walmart is in a significantly stronger position now against Amazon in India.

The rivals are of the view that healthy competition will be a good sign for the e-commerce industry.