The board of Flipkart has today approved an agreement to sell roughly 75 percent of the company to a Walmart Inc led group for approximately $15 billion, according to people familiar with the matter. This is a huge acquisition for Walmart and openly states their intentions when it comes to expansion
In the proposed deal SoftBank Group Corp, will sell all of the 20% stake it holds in Flipkart through an investment fund at a valuation of roughly $20 billion. It is also being speculated that Google-parent company Alphabet Inc. is likely to participate in the investment with Walmart. A final close is expected within 10 days, though terms could still change and a deal isn’t 100% agreed at this stage.
UPDATE: On May 9, Amazon confirmed the deal but stated slightly different terms then mentioned above. In its announcement the company is buying a 77 percent stake for $16 billion. We updated the headline of this story to match the Walmart official press release.
Flipkart to join Walmart Family
If the deal is good and goes ahead this would seal a huge win for Walmart over Amazon, which has been trying to take control of Flipkart with a competing offer.
Flipkart’s board ultimately decided a deal with Walmart is more likely to win regulatory approval because Amazon is the No. 2 eCommerce operator in India behind Flipkart and its primary competitor. Amazon is out of the running unless Walmart hits unforeseen trouble.
This is a big blow to Jeff Bezos who after losing out to Alibaba in China was super focused on winning the Indian market.
If completed, the deal will give Walmart a leading position in the growing market of 1.3 billion people and a chance to rebuild its reputation online. Walmart has struggled against Amazon as consumers increase their spending on the internet. India however is the next big potential prize after the U.S. and China, where foreign retailers have made little progress against Alibaba.
“Flipkart is key to a global e-commerce strategy…Walmart clearly doesn’t want to be left behind in the race as India is a critical piece.” Arvind Singhal, Chairman of Technopak Advisors.
Amazon has already been aggressively expanding in the country on its own. Founder Jeff Bezos has committed $5.5 billion to the country and his local chief, Amit Agarwal, has made progress by adapting the site to local conditions.
Amazon has been gaining ground quickly on Flipkart over recent months and it tried to derail the Walmart transaction as they knew they were gaining ground on the number 1 spot. This now looks like a steeper challenge as Walmart can aid Flipkart with deep pockets and decades of retailing expertise in skills from logistics to marketing.
As part of the Walmart deal, Flipkart’s existing shareholders Tencent Holdings Ltd., South Africa’s Naspers Ltd. and Microsoft Corp. are expected to retain small stakes.
A $20 billion valuation for Flipkart would be substantially higher than the $12 billion mark it hit last year. It is already the most valuable startup in India.
SoftBank stands to make a tidy profit on a stake it took only last year. The Japanese company, through its Vision Fund, invested $2.5 billion at the earlier valuation. That stake could be worth more than $4 billion at the Walmart deal’s valuation.
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