Walmart close to $12bn deal for India’s Flipkart

Stake in ecommerce company to give Walmart major foothold in emerging market

 Flipkart logo. Photograph: Reuters

Flipkart logo. Photograph: Reuters

 

Walmart is close to finalising a deal to buy a majority stake in India’s leading ecommerce company for at least $12 billion and may complete the agreement in the next two weeks.

All the major investors in Flipkart Online Services are now on board with the Walmart purchase, after an earlier debate over whether to sell to Amazon.

Tiger Global Management will sell nearly all its 20 per cent stake in Flipkart, while SoftBank Group will sell a substantial part of its 20 per cent-plus holding, according to reports. Walmart will likely end up with 60- 80 per cent of Flipkart, which will be valued at about $20 billion, they said.

Among the issues that still need to be resolved are what happens to Flipkart’s founders and who will lead Flipkart after the purchase, they said.

If completed, the deal would give Walmart a substantial foothold in an emerging market of 1.3 billion people. The Arkansas-based company is the world’s largest retailer, but it has struggled against Amazon as consumers increasingly migrate to online commerce. India is the next big potential prize after the US and China, where foreign retailers have made little progress against Alibaba. Walmart declined to comment. Flipkart didn’t immediately respond to requests for comment.

Flipkart’s board recently met to discuss the competing proposals and decided Walmart could close a deal more easily. Walmart faces fewer regulatory hurdles because it has no online retail presence in the country now, while Amazon is the second-largest ecommerce player and Flipkart’s primary rival.

Flipkart founders Sachin and Binny Bansal are also said to have favoured Walmart. A Walmart deal has been discussed since at least last year. Amazon founder Jeff Bezos has committed $5.5 billion to India and his country chief, Amit Agarwal, has made progress by adapting the site to local conditions.

A $20 billion pricetag would be substantially higher than Flipkart’s valuation of about $12 billion last year. It is already the most valuable startup in India. Tiger and SoftBank are currently the startup’s largest shareholders, followed by South Africa’s Naspers. If the deal goes through, it would be the biggest in the nascent history of Indian ecommerce.

– Bloomberg