Health Care

SoftBank holds back Paytm-FreeCharge merger until Flipkart, Snapdeal agree to deal

Over a dozen small investors are coming together to oppose any such move, the report said.

Snapdeal's other small investors include the family office of Ratan Tata, the former chairman of the salt-to-software conglomerate Tata Group, as well as Intel Capital and Bessemer Venture Partners, BlackRock and Temasek.

PremjiInvest - the personal investment arm of Wipro chairman Azim Premji and a minority investor in Snapdeal - had written to the company seeking greater clarity on the deal terms.

Snapdeal's Board has representation from Snapdeal founders (Kunal Bahl and Rohit Bansal), SoftBank, NVP and Kalaari Capital.

Separate email queries sent to Snapdeal and PremjiInvest haven't elicited any response.

Citing a letter written by PremjiInvest to the board of directors of Snapdeal, the business daily said special payments to co-founders and select investors was not kosher, though it did not have problems with a similar handout ($30 million) to Snapdeal employees.

Apparently, investors such as Nexus Venture, Kalaari Capital, and Snapdeal founders Kunal Bahl and Rohit Bansal are expected to receive special payouts valued at almost $150 million in the transaction.

However, the investment firm has no objections to the proposed special payment package of $30 million for Snapdeal employees.

The merger is being orchestrated by SoftBank, which has played a role in bringing Snapdeal to the near-extinction stage it is in now.

However, The Economic Times report says special payments to be made to shareholders is expected to be around $150 million. SoftBank, which is looking to own about 20% of the combined entity, will put in more money via its massive joint investment fund.

The reasoning is that a deal will give the cash-starved Snapdeal funds to keep its operations running and, to that extent, less leverage with SoftBank to close the Flipkart-Snapdeal merger early. However, it was contingent on the overall terms of the deal.

Compared to a valuation of about United States dollars 6.5 billion in February 2016, the sale to Flipkart could see Snapdeal being valued at about USD 1 billion.

Troubled e-commerce firm Snapdeal is likely to finalise the particulars of its sale to rival Flipkart in a board meeting scheduled for Tuesday, media reports. The two companies had struck a preliminary agreement last month.

The list of crises at online marketplace Snapdeal seems never-ending.

The deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian e-commerce space.

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