Walmart to pay US$16 bln for control of India’s Flipkart, shares slide

NEW YORK/MUMBAI: Walmart Inc said it will pay US$16 billion for a roughly 77 per cent stake in Indian e-commerce firm Flipkart in its largest-ever deal, an effort to compete with Amazon.com Inc in an important growth market.

Shares of the US retailer fell 3 per cent. The company warned it expects the deal to shave fiscal 2019 earnings by 25-30 cents per share if it closes in the second quarter. It also expects Indian investments to shave 60 cents per share from earnings in fiscal 2020.

For Walmart, the acquisition opens a new front in its battle with Amazon, which had expressed interest in making a competing offer for a stake.

Amazon now holds about 27 per cent of India’s burgeoning e-commerce market, according to Euromonitor, where Walmart only operates 21 cash-and-carry wholesale stores in the country that sell to businesses.

“We will not know for five to 10 years whether this transaction is successful strategically or financially,” said Steven Roorda, portfolio manager with Minnesota-based Stonebridge Capital Advisors.

“Walmart has a very poor track record operating outside North America,” he said.

The deal probably will not do much to change market share between Flipkart and Amazon in India, said Jason Benowitz, senior portfolio manager at the Roosevelt Investment Group. — Reuters