Published on : Apr 23, 2018
Strategic acquisitions in a burgeoning e-commerce sector in India are expected to up the ante higher for retail companies. Amid intense speculation and months of elaborate talks, the U.S.-based multinational retail giant Walmart Inc. is finally considering to buy at least 51% stake in Flipkart, according to sources familiar with the development. The U.S. retail behemoth after acquiring a controlling stake in the Indian e-commerce company seeks to fortify its position in the emerging online marketplace. With the deal going through as early next week, Walmart hopes to cut the mustard and offer a tough competition to its rival Amazon.com Inc. The Seattle-based e-commerce giant isn’t getting any share of the pie.
Earlier, SoftBank Unwilling to Part with its Stake
The deal has been dithering through for some time now as SoftBank Group was hesitating to sell its 23.6% stake, estimated at US$12 billion. Speculation had it that the marked reluctance by the Japanese technology investor to accept the valuation was because it was considered below par. The standoff has been resolved; though it wasn’t clearly whether SoftBank agreed to the valuation. Of note, SoftBank control a fifth of the Mumbai-based e-commerce company through its Vision Fund.
Walmart Exercised Due Diligence in Controlling Majority Stake and Ready to Infuse Funds in Flipkart
The purchase of equity would value the Indian e-commerce company at US$18 Bn. According to reports, Walmart has exercised due diligence to control the majority of stake and is prepared to infuse substantial funds in Flipkart. According to some source quoted by Reuters, Flipkart’s leading investors are U.S. hedge fund Tiger Management Corp., Naspers, South Africa-based technology investor and a renowned U.S.-based venture capital firm Accel are expected to exit the market after the deal goes through. Furthermore, the co-founders of Flipkart, Sachin Bansal and Binny Bansal, who own only a small percent of the shares, are in all likelihood expected to sell their stake.
However, Walmart will make all efforts to retain the top talent engaged with Flipkart, especially its CEO as well as its executive chairman.