Flipkart sends revised $850 m offer to Snapdeal
NEW OFFER Deal includes marketplace and Unicommerce, but not Freecharge
BENGALURU: Online retailer Flipkart has sent a revised offer to buy smaller rival Snapdeal for roughly $850 million, said two people familiar with the matter.
Flipkart has offered to pay $650-700 million in stock immediately and another $150 million at a later date, the people said.
The board of Snapdeal (Jasper Infotech Pvt Ltd)met on Monday night to consider the offer, the people said.
Flipkart’s offer includes Snapdeal’s marketplace business and Unicommerce but not Freecharge and Vulcan Express, the people said.
Snapdeal is still in talks to try and sell the payments platform Freecharge and its logistics unit Vulcan, the people said. The company may still include Vulcan as part of the Flipkart if it is unable to finalise a separate sale of the unit, they said.
Last week, Mint reported that Snapdeal had asked Flipkart to pay at least $900 million to buy the company.
If Snapdeal accepts Flipkart’s latest proposal, the companies will then negotiate a sale and purchase agreement (SPA), a contract that will bind the two companies to conclude the deal. Snapdeal will then call for a shareholder meeting to get the deal approved by all of its shareholders, the people cited above said. Snapdeal has more than 25 institutional shareholders as well as dozens of individual partowners.
The final closure of the deal could still be months away given that some of Snapdeal’s minority investors such as Premji Invest
THE SALE OF SNAPDEAL IS LIKELY TO BE ACCOMPANIED BY AN EQUITY INFUSION INTO FLIPKART BY SOFTBANK
have objected to the proposed sale to Flipkart, the two people cited above said.
Flipkart and Snapdeal did not respond to emails seeking comment late on Monday.
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. Since then, Snapdeal, which had been running Flipkart close and was bigger than Amazon India at the time, has struggled. It became an also-ran in India’s e-commerce market, cut thousands of jobs and saw an exodus of senior and middle managers.
Its board became dysfunctional as the financial interests of investors clashed. Finally, this March, SoftBank Group Corp, the company’s largest shareholder, initiated talks to sell the company, initially against the wishes of its founders Kunal Bahl and Rohit Bansal, who came around later.
The Snapdeal sale to Flipkart is being done mainly for the benefit of SoftBank and Tiger Global Management, Flipkart’s largest investor.
The deal is an attempt at financial engineering by Tiger Global and SoftBank, which have seen their bets falter to differing degrees since the start of 2016 (SoftBank’s a lot more so than Tiger Global’s), Mint reported on April 17.
The sale of Snapdeal is likely to be accompanied by an equity infusion into Flipkart by SoftBank, which is also in talks to buy part of Tiger’s 30-33% stake in Flipkart.