SON, BEZZO SET FOR CLASH IN INDIA
SoftBank chief closing on Snapdeal-Flipkart deal to rival Amazon’s US$5b push into country
SOFTBANK Group Corp’s Masayoshi Son and Amazon.com Inc 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 (RM4.43 billion).
Snapdeal’s founders and early investors had resisted such a steep cut, but SoftBank has argued the deal was necessary as venture funding dried up and competition intensified. Talks are now in the final stages and a deal could be signed within weeks, though it’s also possible they could fall apart.
Snapdeal cofounder and chief executive officer Kunal Bahl raised the possibility of an acquisition in an email to employees over the weekend, explaining he and cofounder Rohit Bansal were seeking to protect employees.
“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 ecommerce players is being called an arranged marriage, with Son playing the role of matchmaker.
The Japanese billionaire, who owns about a third of Snapdeal parent Jasper Infotech Pvt, plans to contribute that equity to the merged entity and to infuse another US$500 million to US$1 billion 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. The Seattle-based company has vowed to spend US$5 billion in the country and India chief Amit Agarwal has used the money to gain customers.
Son financed a similar battle in China — and won billions. He was one of the earliest backers of Alibaba Group Holding Ltd, 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$80 billion.
Flipkart is already raising cash for the battle. The company is said to have recently struck a deal for US$1 billion in funding from investors, including Tencent Holdings, Microsoft Corp and EBay Inc. An alliance among Flipkart, Snapdeal and EBay would give the business customers, scale and technology, though it’s not clear how easily those could be integrated. Bloomberg