Snapdeal okays Flipkart’s $850 m takeover offer
DEAL STREET SoftBank wins in battle against founders Bahl and Bansal; companies to start negotiations on Monday
BENGALURU: The board of online marketplace Snapdeal has given the go-ahead to the company to continue negotiations to sell itself to Flipkart, which had increased its buyout offer to $850 million last week, three people familiar with the matter said.
The development implies that Snapdeal’s largest investor SoftBank Group Corp has won the boardroom battle against two other investors and Snapdeal founders, Kunal Bahl and Rohit Bansal, both of whom wanted to sell the company to Infibeam Inc. or stay independent.
Snapdeal and Flipkart will start negotiations on Monday to finalise a sales and purchase agreement (SPA), the people cited above said. An SPA is a contract that will bind the two companies to conclude the deal.
Snapdeal will then call for a shareholders’ meeting to get the deal approved by all of them, the people said. It has more than 25 institutional shareholders as well as dozens of individual partowners.
SoftBank has already reached out to smaller shareholders in Snapdeal to seek their approval on the current terms of the deal, one of the three people said.
On 18 July, Mint had reported that Flipkart sent a revised buyout offer of roughly $850 million to Snapdeal.
On 24 July, Mint reported that the board of Snapdeal was divided about the company’s proposed sale, as Snapdeal founders Bahl and Bansal were pushing for a sale to Infibeam or getting Snapdeal to survive as an independent company by cutting both a majority of jobs and the size of the business.
Snapdeal, SoftBank and Flip- kart declined comment.
As part of the all-stock offer of $850 million, Flipkart has offered to pay $650-700 million in stock immediately and another $150 million at a later date. Flipkart’s offer includes Snapdeal’s marketplace business and software provider Unicommerce. The company is also likely to include its logistics unit Vulcan Express in the sale, the people cited above said.
Helped by a spurt in availability of cheap phones and data plans, more and more Indians are shopping on the web. A 2016 report from accounting firm EY said that e-commerce had grown at a compound annual growth rate of over 50% in the last five years in India and the pace of growth is expected to continue, with e-commerce sales topping $35 billion by 2020.
The rapid growth has been accompanied by severe competition and a fierce war for supremacy between Flipkart and US online retail giant Amazon, which has committed to investing $5 billion in the country.
The acquisition of Snapdeal means one less rival for Flipkart, said Harminder Sahni the founder of Wazir Advisors, a boutique consultancy firm.
“Flipkart may have a plan to run Snapdeal as a differently positioned business just like they run Myntra and Jabong,” he said. Myntra and Jabong are Flipkart’s fashion portals.
AS PART OF THE ALLSTOCK OFFER OF $850 MILLION, FLIPKART HAS OFFERED TO PAY $650700 MILLION IN STOCK IMMEDIATELY AND ANOTHER $150 MILLION AT A LATER DATE