Walmart may strike deal by June for majority stake in Flipkart

HONG KONG/MUMBAI: Walmart is likely to reach a deal to buy a majority stake in e-commerce company Flipkart by the end of June in what could be the US retail giant’s biggest acquisition of an online business, two people with direct knowledge of the matter said on Thursday.

Walmart completed its due diligence on Flipkart and had made a proposal to buy 51% or more of the Indian company for between $10-12 billion. A deal with Flipkart would step up Walmart’s battle with Amazon for a bigger

WALMART WILL BUY BOTH NEW AND EXISTING FLIPKART SHARES, WITH THE NEW SHARES EXPECTED TO VALUE THE BENGALURUBASED FIRM AT LEAST $18 BN

share of India’s fledgling e-commerce market, which Morgan Stanley estimates will be worth than $200 billion in a decade. Mint reported on 4 April that Amazon is exploring a possible counter-offer for Flipkart.

Both people declined to be named as the talks are private.

Walmart will buy both new and existing Flipkart shares, with the new shares expected to value the Bengaluru-based firm at least $18 billion, they said. The price for existing shares would value the firm at about $12 billion, one of the people said.

Japan’s SoftBank Group Corp, which owns roughly one-fifth of Flipkart via its Vision Fund, is unlikely to sell any of its shares due to the low price being offered for the existing ones, one of the persons said. Reuters previously reported that early investors such as Tiger Global Management, Accel Partners and Naspers will likely sell their entire stake in Flipkart to Walmart if a deal is reached. Talks between Walmart, Flipkart and its investors are ongoing, one of the people said. Flipkart also counts eBay, Tencent Holdings and Microsoft Corp. among its investors. Flipkart did not respond to a request for comment, a representative for Walmart in India declined comment while SoftBank said it doesn’t comment on speculation.

BIG INDIAN BATTLE

For Walmart, the world’s largest retailer known for its superstores, a deal with Flipkart would open up the vast Indian market.

Walmart has for years tried to enter India but has remained confined to a “cash-and-carry” wholesale business amid tough restrictions on foreign investment. It currently operates 21 such stores in India.

By comparison, Amazon closely trails Flipkart, which along with its fashion units controls nearly 40% of India’s online retail market, according to estimates by researcher Forrester.

Walmart’s push comes as Amazon has embraced offline retail, with an affiliate of the company picking up a $27.6 million stake in Shopper’s Stop Ltd.