In merger push, Credit Suisse tries to clear Premji hurdle
Even as Flipkart Online Services Pvt’s planned acquisition of rival Indian e-commerce provider Snapdeal has hit a snag over a smaller shareholder of the latter objecting to special payments to certain investors, investment bank Credit Suisse is reaching out to minority shareholders of Snapdeal to build a consensus on the sale of the e-commerce platform to Flipkart. Meanwhile, the snag may put the deal in jeopardy, or at least substantially drive down Snapdeal’s valuation from a previously agreedupon $1 billion.
According to sources, Credit Suisse, which is advising Snapdeal on the proposed deal, is reaching out to smaller shareholders to get them on board for the acquisition.
One of the smaller investors in Snapdeal, the family office of billionaire Azim Premji, has objected to special payments to certain shareholders including its two co-founders and two early backers, according to people familiar with the discussions. Flipkart had earlier told Snapdeal that it wants all the startup’s investors to agree to deal terms as a precondition of the transaction, said the people, who asked not to be identified discussing information that’s not public. Snapdeal has a number of investors including PremjiInvest, Ontario Teachers’ Pension Plan, Ratan Tata, Foxconn, Temasek and BlackRock.
The sticking point has been the differential payments, which are seen as an attempt to win over larger Snapdeal investors and the founders who have to agree to a vastly lowered valuation. Under the proposed terms, early investors, like Kalaari Capital and Nexus Venture Partners, would receive $60 million in addition to their new equity in Flipkart, while founders, Kunal Bahl and Rohit Bansal, would get a combined $30 million.
PremjiInvest sent a letter on Wednesday to the Snapdeal board saying that the $90 million to be handed to this select group of early Snapdeal shareholders and founders isn’t acceptable, the people said. Another $30 million in special payments proposed by the Snapdeal board for the employees, on the other hand, is okay, the letter said.
The letter said that other small investors were also unhappy with the difference in payments, the people said.