Home / Companies / News /  SoftBank takes Snapdeal closer to Flipkart sale but yet to seal terms

New Delhi: The board of directors of Jasper Infotech Pvt Ltd, which runs struggling online marketplace Snapdeal moved a step closer to agreeing to a distress sale to bigger rival Flipkart Ltd even as a conflict between the company’s largest investor SoftBank Group Corp and three key shareholders remains unresolved.

At a board meeting on Tuesday, SoftBank finally convinced Snapdeal co-founders Kunal Bahl and Rohit Bansal, Nexus Venture Partners and Kalaari Capital to agree to sell the company to Flipkart, three people familiar with the matter said on condition of anonymity.

Until now, the other investors were holding out on a sale to Flipkart, hoping that the company could find other suitors, increasing the sale price, even find new investors.

On Tuesday all board members including representatives of Nexus and the Snapdeal co-founders agreed that the only viable course left for the company was a sale to Flipkart, the people cited above said. Another bigger Snapdeal rival Paytm, run by One97 Communications has dropped out of the race to buy Snapdeal even though it has expressed in buying Snapdeal’s payments arm Freecharge in a cut-price deal, the people said.

Still, Nexus and others are yet to agree to the terms of a sale, the people added. Nexus, Kalaari and the Snapdeal founders want SoftBank to buy out their shares at a lucrative price and the Japanese firm hasn’t yet matched their demands, the people said.

Last month, Flipkart offered $ 1billion in stock to buy Snapdeal (excluding Freecharge). It is expected to make another offer once the boardroom battle at Snapdeal is resolved, the people said. Snapdeal, which has raised nearly $2 billion in cash, hit a peak valuation of $6.5 billion in February 2016 when it received $50 million from investors.

“Things are moving slowly with the board but moving in the right direction," one of the people said, adding that the Snapdeal board did not reach a conclusive agreement on Tuesday. “(But) at least the board has agreed to start negotiations on the Flipkart term sheet," he added.

A fourth person close to the matter said SoftBank expressed willingness to meet the founders demand that employees get to keep their jobs and also get something from the sale after the sale to Flipkart. SoftBank is confident of winning over Kalaari, too, but negotiations with Nexus are expected to take longer to conclude, this person said.

Venture capital (VC) firms Nexus and Kalaari have been locked in a tussle with SoftBank over the company’s valuation in a potential sale or funding round over the past few months. Snapdeal is the largest investment for Kalaari and Nexus, and a bad deal could be damaging for the two home-grown venture capital firms.

SoftBank, is keen to sell Snapdeal to Flipkart in order to cut its losses on an investment that has faltered badly. SoftBank picked Snapdeal over Flipkart and Paytm in 2014 but the marketplace has lost out to Flipkart and Paytm in e-commerce and digital payments, respectively. Now SoftBank is keen to invest huge amounts of cash in the two Snapdeal rivals.

The boardroom battle has amplified the crisis at Snapdeal, which has cut hundreds of jobs and seen a slump in monthly sales since January. Mint reported on 28 April that Snapdeal has cash left to last less than four months.

Investment bank Credit Suisse, which helped Snapdeal raise funds in 2014, is representing Snapdeal in the proposed deal with Flipkart.

Anirban Sen contributed to the story

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