Walmart is all set to acquire Flipkart in a deal that is pegged at around $17 billion. Walmart will be buying 73% of the Indian e-commerce company and as a part of the deal will be spending somewhere around $14.6 billion for the buyout. The Flipkart-Walmart deal is expected to be one of the major acquisition and mergers in the Indian market.
As per FactorDaily, Flipkart is pegged at $20 Billion while Walmart has put the company’s value at $22 billion. This means that Walmart has to spend $16 Billion to acquire Flipkart. Google’s parent company, Alphabet is also said to be participating in the buyout via an investment of $3 billion. Meanwhile, Kalyan Krishnamurthy will continue to serve as the Chief Executive of Flipkart.
The deal is expected to include both cash and stock component. Cash component is likely to be around 55%. With this deal, many of the large investors in Flipkart will exit. That being said, investors like Tencent, Microsoft, and Tiger Global will not cash out completely. Softbank with 20% of shares is speculated to exit the company and rake in a total of $4 billion in the process. The deal was lead by Walmart with JP Morgan Chase as its banker and with Amarchand Mangaldas as legal advisors and Bain and Co as management consultants. Flipkart and Walmart are yet to announce the acquisition officially.
Flipkart seems to be preparing for this deal for quite some time. As per the regulatory filings, Flipkart Ltd purchases shares for $350 Million from its investors and also initiated the process of converting Flipkart into a Pvt Ltd company. In all likelihood, this will help the strategic investors who don’t prefer to deal with multiple shareholders due to the intricacies involved in the same. The report says Walmart intends to take the IPO route in three years time. Flipkart is the biggest e-commerce destination in India and the Walmart deal will only help it replenish the war chest and battle with Amazon for market dominance.