WALMART BUYS 77% STAKE IN FLIPKART FOR $16 BILLION

BENGALURU/TOKYO: The world’s largest retailer, Walmart Inc, on Wednesday announced it was buying 77% equity stake in India’s e-tail major Flipkart for $16 billion.

“Subject to regulatory approval in India, Walmart will pay $16 billion for an initial stake of 77% in Flipkart,” the Kansasbased company said in a statement from the US.

SoftBank CEO Masayoshi Son, whose firm owns a 20 percent stake in Flipkart, said that “Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to Walmart.”

Softbank will exit Flipkart by selling its entire 20% stake to Walmart.

The deal values the 11-year old Indian e-commerce firm at $20.8 billion. Sachin Bansal, who had co-founded Flipkart with Binny Bansal in 2007, would exit the company after the deal, according to sources. Sachin and Binny, who are not related and formerly worked for Amazon.com Inc, like their US rival began by selling books when they founded Flipkart.

BENGALURU: Walmart’s investors reacted negatively to the news of the retail giant’s buyout of Flipkart on Wednesday, as over $10 billion worth of Walmart’s market value was wiped away, as investors punished the stock in early morning trading on the New York Stock Exchange (NYSE).

In pre-market trading at around 6.30pm Indian Standard Time, Walmart’s shares on the NYSE had fallen a little over 5%. The stock pared losses somewhat later in the day, and as of 9.00pm in India, it was trading down 4.04% from the previous day’s close.

The US-based retailer’s market capitalization had dropped to $242.9 billion.

On the other hand, Amazon.com Inc.’s shares had risen marginally, and the stock was up 0.2% as of 9.00pm.

S&P lowered Walmart’s outlook to negative from stable, citing increasing leverage and risks stemming from the company’s spending to expand online and globally as it continues its share buyback program. The credit firm rates Walmart AA, the thirdhighest investment grade.

The negative outlook shows there’s “about a one-in-three chance” that Walmart’s strategy shift could result in a downgrade over the next two years, the credit-ratings company said in a statement.