Retail giant Walmart Inc. might close the agreement to buy a majority stake in e-commerce group Flipkart Online Services Pvt. Ltd. for at least $12 billion as early as next week, an deal that will provide the grocery store operator a place in India’s emerging e-commerce market.
Sources familiar with the matter said all major investors of Flipkart now support the Walmart acquisition, after earlier deliberation over an Amazon.com Inc. purchase. If the transaction goes through, it would be the biggest in the country’s e-commerce industry.
Earlier reports stated that Arkansas-based company has completed its due diligence process and has proposed to buy a 51 percent stake in the Indian firm for $7 billion.
Flipkart’s board has favored Walmart over Amazon, as they believe Walmart can complete the agreement more easily, since it is likely to have less regulatory matters to address.
Walmart declined to comment on the recent development, while Flipkart has not yet responded to requests for statement.
Hedge fund group Tiger Management Corp. will sell nearly all of its 20 percent holding in the online retail startup, while multinational conglomerate SoftBank Group Corp. will give a huge portion of its 20 percent-plus stake, according to the people.
The Japanese holding company is expected to profit on a deal it cut last year. SoftBank was believed to have invested $2.5 billion at the previous valuation in August, and at Walmart deal’s valuation, that stake could be worth more than $4 billion.
SoftBank and the Tiger Fund are currently Flipkart’s major shareholders, followed by South Africa’s internet firm Naspers Ltd.
Shares of Walmart were up by 0.08 percent to $87.05 in after-hour trading.
Walmart’s Likely Entrance into India’s E-commerce Market
With India’s biggest online retailer teaming up with the world’s largest retail company, industry spectators expect the Walmart-Flipkart deal will help customers, as much as the latter’s investors and shareholders.
Sources stated that the deal could leave Walmart with 60 percent to 80 percent of Flipkart, valued at $20 billion, which is more than the e-commerce company’s 2017 valuation of about $12 billion. Flipkart is already the most valuable startup in India.
The brick-and-mortar store operator will also gain significant foothold in the country’s online commerce market, seeing that it has been struggling to keep up with Amazon as online shopping grows more and more popular.
Walmart has long been a business-to-business (B2B) player in India, but has never been a business-to-consumer (B2C) participant, since Foreign Direct Investment (FDI) rules restrict the company from doing such transactions.
Meanwhile, the Seattle-based retailer has been expanding its presence in India single-handedly, with founder and chief executive Jeff Bezos committing $5.5 billion to the country, and Amazon India head Amit Agarwal creating progress by adjusting the business based on conditions in the country.
Amazon India currently has more than 115 million registered users, according to Agarwal.
Senior forecast analyst Satish Meena stated that there is no other country offering this kind of prospect, adding that even though India may not be a big deal now, it is the future opportunity that Walmart and Amazon are looking for.
Meena also believes the agreement will further strengthen the growth of e-commerce in India.
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