In what looks like a real possibility of a Amazon Flipkart merger, US online retail giant Amazon has made a formal offer to buy a 60 per cent stake in India’s leading e-commerce marketplace Flipkart, according to a report by CNBC TV18 which cited sources.
Amazon’s offer to acquire a majority stake in Flipkart comes at a time when rival Walmart is close to completing a $12 billion deal to pick up an equivalent amount of stake in the Indian firm. Talks between Walmart and Flipkart have been on for months now and the deal was expected to close soon.
CNBC TV18 reported that Amazon’s offer was on par with Walmart bid, while it had additionally offered to pay a $2 billion breakup fee if the deal for some reason does not go through. It added that Walmart still remained the front-runner in the deal as Flipkart investors Tiger Global, Naspers as well as founders Sachin Bansal and Binny Bansal prefer Walmart over Amazon.
Talks of Amazon making a counterbid to pick up stake in Flipkart have been doing the rounds for a while now, but insiders had said that the US giant had not come to the table yet and talks between Walmart were progressing positively. Softbank was said to be the only investor in Flipkart which had some amount of apprehension with the deal.
Tiger Global which controls around 20 per cent of Flipkart, Naspers which controls around 14 per cent and other smaller investors are all expected to gain full exits from the company post the deal. Softbank, the largest investor in the Indian company with around 25 per cent stake is expected to sell a big portion of its holding in the deal.
Walmart has agreed to invest around $12 billion to pick up around 60 per cent stake in Flipkart, in a mix of primary and secondary deals. While the valuation of the primary component can be as high as $20 billion, the second component will be at a much lower valuation.
Previous reports have stated that Flipkart’s founders and investors have been uncomfortable with selling their stake to Amazon given that the deal could face regulatory hurdles. Flipkart and Amazon combined would control a little over 80 per cent of India’s overall e-commerce market, which could raise red flags for the anti-competition regulators of the country.