Walmart moves a step closer to Flipkart deal

Walmart moves a step closer to Flipkart deal”

Flipkart has executed a buyback of shares from a group of investors to convert the e-commerce company into a private limited firm under Singaporean laws. "So far, Flipkart investors are holding out to see what Amazon has to offer". Last year, SoftBank Vision Fund had pumped in an estimated $2.5 billion in Flipkart for about 20 per cent stake in the company.

Unlike the previous buyback in which a large number of shareholders sold a portion of their shareholding, the current buyback involves the clean exit of a part of Flipkart's large shareholder base.

The battle for dominance on the Indian e-commerce market seems to be stepping up a notch: Amazon may be looking to buy a majority stake in Flipkart, trying to better Walmart which already started negociations with the Indian online retailer. According to regulatory filings made by the e-commerce major in Singapore, and sourced through data platform, Flipkart has paid a set of investors - including T Rowe Price and Valic - about $350 million to purchase 18,95,574 preference shares.

The Walmart-Flipkart negotiations have been reported by Mint and other publications for several months now.

"Financially, the deals are pretty much on par", Saxena noted, "but Amazon has offered a breakup fee...of about $2 billion, which essentially...if the deal doesn't go through between the two players, if for some reason the deal is terminated, there is a breakup fee requirement". Walmart may end up spending anywhere between $8 billion and $12 billion to buy a majority stake in Flipkart, and is expected to increase its shareholding in the online retailer in a phased manner.

Binny Bansal and Krishnamurthy, a former executive at Flipkart's most influential shareholder Tiger Global Management, are likely to stay back after the deal.

Amazon is also reportedly seeking a non-compete agreement with Flipkart's founders of somewhere between one and two years.

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