Walmart majority stake purchase in Flipkart finalised: SoftBank's Son
09 May 2018
Global retail giant Walmart has formally agreed to buy a controlling stake in Flipkart. Though there was no official announcement yet, the deal — probably the biggest in the e-commerce space —was confirmed by Masayoshi Son, chief executive of Japan’s SoftBank, the largest investor in Flipkart.
"Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to America's Walmart," said Son, whose firm owns a little over 20 per cent in Flipkart.
SoftBank’s stake in Flipkart is worth about $4 billion in the deal, Son said in an earnings webcast. Son had bought this stake for $2.5 billion last August (See: SoftBank Vision Fund invests $2-2.5 bn in Flipkart). He did not elaborate any further on the terms of the deal, which is expected to give the Indian ecommerce market a major shake-up.
According to Business Standard, people in the know have said that Walmart will acquire as much as 75 per cent in Flipkart, with an investment of $15 billion. The Indian firm will be valued at $20 billion, a significant bump in its valuation compared to $12 billion when SoftBank backed it last year.
The deal, expected to be announced formally later today, is billed to be the biggest transaction in the online retail sector globally. It will allow Walmart to gain a foothold in the fast-growing online retail market in India and also give it a leg up over global rival Amazon, which continues to lag behind Flipkart in India.
Walmart has been in India for over a decade, but has remained confined to a 'cash-and-carry' wholesale business amid tough restrictions on foreign investment (See: Bharti, Wal-Mart in wholesale joint venture, says government).
It currently operates 21 such stores in India, but restrictive regulations and a failed partnership with Bharti Group have meant that it has never shown a profit here (See: Walmart ends alliance with Bharti; to go slow with wholesale business) .
India is the third-largest retail market after the US and China. Walmart has struggled to match Amazon in its home market of the US and it isn’t breaking any records in China, either. India is touted to be the last large open market in the world and the deal to acquire Flipkart is in line with the aim of capturing this market.
Walmart is known for its brick-and-mortar stores rather than online retail, and it remains to be seen whether it pushes to open retail stores in the country after the deal.
Apart from SoftBank, another major Flipkart investor expected to exit completely after the deal is Naspers. Tiger Global and Accel Partners, among the earliest investors in the firm, could sell most of their stake in the Indian company but retain a small amount after the transaction, reports say.
Earlier reports had said Flipkart executive chairman Sachin Bansal is likely to quit the board if the deal goes through, while Binny Bansal (no relation of Sachin) will continue with the company. (See: Sachin Bansal likely to quit Flipkart if Walmart stake sale goes through).
Flipkart was founded in 2007 in Bengaluru by Sachin Bansal and Binny Bansal, former employees of Amazon. The first billion-dollar Indian e-commerce company, Flipkart, sells 8 million products across 80-plus categories. It has 100 million registered users.
Japan's SoftBank Group Corp owns a fifth of Flipkart through its Vision Fund. Other major investors in Flipkart include Tiger Global, Naspers and Accel, while the Bansals own just over 5 per cent each of the company, according to data from business intelligence platform paper.vc.
Last year, Kalyan Krishnamurthy, previously an executive in Flipkart investor Tiger Global, took over as Flipkart CEO. Binny Bansal became CEO of the whole group, which includes fashion portals Myntra-Jabong, payments unit PhonePe and logistics firm Ekart.