Battle coming
Online giants set to clash in India
SoftBank Group’s Masayoshi Son and Amazon.com founder Jeff Bezos are heading for a clash in India.
SoftBank is closing in on an agreement to combine its e-commerce company Snapdeal with market leader Flipkart Online Services, creating a stronger domestic player to compete with the American behemoth, according to people familiar with the matter.
To get the merger done, Son is willing to cut Snapdeal’s valuation 85 per cent to US$1 billion ($1.44b), said the people, asking not to be named because the talk is private.
Snapdeal’s founders and early investors had resisted such a steep cut, but SoftBank has argued the deal is necessary as venture funding dries up and competition intensifies, the people said. Talks are now in the final stages and a deal could be signed
The combination of India’s two leading e-commerce players is being called an arranged marriage, with Son playing the role of matchmaker. unnamed source
within weeks, they said. Snapdeal co-founder and chief executive Kunal Bahl raised the possibility of an acquisition in an email to employees over the weekend, explaining he and co-founder Rohit Bansal are seeking to protect staff. “While our investors are driving the discussions around the way forward, I am reaching out to let you know that the well-being of the entire team is mine and Rohit’s top and only priority,” Bahl wrote. Flipkart, Snapdeal and SoftBank all declined to comment. The combination of India’s two leading e-commerce players is being called an arranged marriage, said the people, with Son playing the role of matchmaker. The Japanese billionaire, who owns about a third of Snapdeal parent Jasper Infotech, plans to contribute that equity to the merged entity and to infuse another US$500 million to US$1b in Flipkart through a transaction with Flipkart backer Tiger Global Management.
That would give Flipkart more firepower to battle Amazon in one of the world’s fastest-growing online retail markets.
Son financed a similar battle in China — and won billions. He was one of the earliest backers of Alibaba Group, the e-commerce player that first defeated eBay in China and then successfully fended off Amazon. That investment remains one of his most successful to date, giving him stock worth more than US$80b.
Flipkart is already raising cash for the battle. The company said yesterday it had raised US$1.4b from Tencent Holdings, Microsoft and eBay in what it said was the largest internet investment in India.
Flipkart said the post-transaction valuation for the company was US$11.6b. An alliance among Flipkart, Snapdeal and eBay could give the business customers, scale and technology, though it’s not clear how easily those could be integrated.
“This deal reaffirms our resolve to hasten the transformation of commerce in India through technology,” the company’s co-founders Sachin Bansal and Binny Bansal said.