Walmart completes due diligence for Flipkart deal
Walmart wants to take a controlling stake of 51% or more in Flipkart and will retain most of the top leadership, barring a chief financial officer that it would appoint itself
New Delhi: Walmart Inc. has completed a thorough due diligence process on e-commerce firm Flipkart this week, two people said, as the US retail giant looks to take a controlling stake of 51% or more in the Indian e-commerce firm.
Walmart has already floated a shareholder agreement, or offer proposal, and is looking to shell out about $10 billion to $12 billion for the stake that would value Flipkart at roughly $20 billion, one of the people familiar with the matter said.
A deal is far from finalized, however, and talks between the two parties and investors in Flipkart are ongoing, said a third person.
The people asked not to be named because the talks are private.
A stake in Flipkart would pit Walmart against Amazon.com Inc. in India. Mint reported on Wednesday that Amazon is exploring a rival offer for India’s largest home-grown e-commerce player.
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Walmart is now seeking a bigger stake than previously expected. Reuters reported in February that it was in talks to purchase a stake of over 40% in Flipkart, which is backed by the likes of SoftBank Group Corp., Tiger Global Management, eBay, Accel Partners, Naspers, Tencent Holdings and Microsoft Corp.
Walmart and Flipkart declined to comment. SoftBank also declined to comment, while Tiger Global, its other lead investor, was not immediately reachable for comment.
Bengaluru-based Flipkart, started by two former Amazon employees Sachin Bansal and Binny Bansal (not related), is fighting Amazon to grab a bigger piece of India’s massive online retail market which, according to Morgan Stanley, could be worth $200 billion in a decade.
Walmart’s investment would give Flipkart not just additional funds to fight Amazon, but also arm it with a formidable ally with extensive experience in retailing, logistics and supply chain management.
It is seen as a more likely investor than Amazon. A person familiar with the matter told Reuters that the probability of a Flipkart-Amazon deal was low, and that such a deal may spark competition fears as Flipkart and Amazon dominate India’s e-commerce market.
Bentonville, Arkansas-based Walmart could also aid Flipkart in developing its private label business, one of the people quoted above said.
For Walmart, a Flipkart deal would open up a vast market and another front to take on its biggest rival.
Walmart is initially not expected to rock the boat and is likely to retain top management. It may, however, look to bring in some of its own people on the legal and finance teams at Flipkart, one of the people said.
Walmart would also likely have a say in the appointment of a chief financial officer at Flipkart, if the deal is concluded, said another of the three people quoted above.
Two of these three people said Tiger Global Management, Accel Partners and Naspers, would likely sell their entire stakes in Flipkart to Walmart if a deal is reached.
Accel and Naspers declined to comment.
Japan’s SoftBank, which has invested in Flipkart through its SoftBank Vision Fund, may also consider selling a part of its roughly 20% stake if Walmart offers a good price, two people said.
SoftBank last year invested $2.5 billion in Flipkart through prime and secondary share purchases. Reuters
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