Walmart signs term sheet for buying a majority stake in Flipkart
American retailer Walmart has joined hands with Google’s parent company Alphabet to acquire a major stake in the Indian e-commerce business Flipkart. Walmart has recently signed a definitive agreement to acquire about 75 per cent of the Indian online retailer and has made a formal announcement for the same.
As part of the deal, co-founder and executive chairman Sachin Bansal has announced to exit completely, selling his 5.55 per cent stake. Flipkart’s existing shareholders China’s Tencent Holdings, and US-based Tiger Global Management, are making a partial exit, retaining small stakes. South Africa-based Naspers Ltd and Microsoft Corp will also keep small holdings in the new company.
Sources indicate that these investors likely have the option of selling their stake to the Bentonville-based retailer at a later date at the same valuation at which Walmart bought a majority stake in Flipkart. SoftBank, which owns 20.8 percent stake in the company will exit completely. Headed by Masayoshi Son, the Japanese company will make a neat profit by selling its stake in Flipkart, with its investment of US$ 2.5 billion set to fetch about US$ 4 billion, a gain of 60 percent.
Tencent Holdings and Tiger Global Management will continue their representation on the board. Flipkart will be listed on Indian stock exchanges in the subsequent years, as a fully-owned Walmart subsidiary, a corporate strategy similar to what it has adopted in Mexico.
Walmart India and Flipkart will continue to maintain distinct brands after the deal. New investors can pick stake in Flipkart in a fresh round. While it could bring down Walmart’s holding slightly, the American giant will continue to retain a significant majority holding.
Walmart is likely to use a mix of fresh debt and cash to finance the deal. After the deal’s closure, Flipkart’s financials will be reported as part of Walmart International.