Snapdeal rejects Flipkart's buyout offer: Find out why

Snapdeal rejects Flipkart's buyout offer: Find out why”

A private security guard stands at a gate of Snapdeal headquarters in Gurugram on the outskirts of New Delhi, India, April 3, 2017.

Indian mobile commerce giant Flipkart has reportedly been closing in on a deal to buy rival Snapdeal, but now the latter has rejected an initial buyout bid from Flipkart, sources close to the matter told Reuters.

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.

The deal could still take shape if Flipkart can come up with a revised offer to the Snapdeal shareholders although the exclusivity period to make an offer ended on July 2, as reported by the Indian Express.

"The due diligence came up all clean", said one of the two sources, adding that the low-ball offer put forward was hence inexplicable and therefore rejected. The Reuters report suggests the rejection was a negotiating tactic, and perhaps an appropriate response to Flipkart delivering a bid for Snapdeal that was below its own reported valuation of the company. However, despite the rejection, talks are ongoing, with a deal expected by mid-July.

The fresh capital infusion made last month will make it the second largest global investor in India's digital economy, after Japanese internet major SoftBank which has invested close to $4 billion already, but ahead of Flipkart backer Tiger Global which has parked less than $2 billion here.

Flipkart, Snapdeal and their key investors did not immediately respond to requests for comment.

Flipkart has not now bid for Snapdeal's logistics arm Vulcan Express and its digital payments venture FreeCharge, said the first source, adding that these assets may be sold separately.

Discussions regarding a potential deal between the companies have been underway since May, when SoftBank negotiated a preliminary takeover deal with Snapdeal's founders and Nexus, which was an early investor in the e-commerce firm.

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