American brick-and-mortar giant Walmart is reportedly finalizing a deal with Flipkart to acquire a majority stake in the Indian e-commerce firm. Meanwhile, Flipkart is also being wooed by American online store Amazon, which too wants a majority stake.
SoftBank, the current largest shareholder, is reportedly interested in investing $4 billion more if a merger with Amazon goes through, the Times of India reported. However, Walmart is said to be only days away from making the deal with Flipkart.
Walmart’s interest in Flipkart has led to a valuation of around $20 billion for the Indian company. The purchase will also lead to better stock market valuation for Walmart, which is in close competition with Amazon.
While Amazon has given a higher valuation for Flipkart, at about $22-23 billion, the deal is likely to lead to scrutiny from the Competition Commission of India (CCI), sharing of highly confidential information, and a long process, according to the Economic Times.
“If the combined market share of the parties who are competitors exceeds 15 per cent, then they will have to notify the CCI by way of a Form 2 — which requires the parties to furnish very detailed information, data and analysis,” Ravisekhar Nair, partner of competition law at ELP, was quoted by the publication as saying. Flipkart group, including fashion portals Myntra and Jabong, have a combined market share of over 39.1 per cent while Amazon has 31.1 per cent share in the Indian online retail market, according to a recent report by Forrester Research, the ET report said. “Typically, a Form 2, process can take anywhere between 3- 12 months depending on the complexity of the transaction and markets impacted by the transaction,” Nair said.
A Form 1 notification, on the other hand, will take around three months, which is what a Walmart and Flipkart deal would need.
SoftBank was reportedly more keen on Flipkart considering Amazon, which meant a share swap between its Indian unit and Flipkart, while other investors like Tiger Global Management, Accel, Naspers and Tencent are in favor of Walmart.
Also, the management team will not change with a Walmart deal, but it may have to go with Amazon, sources told ET.