Walmart is acquiring 77 percent stake in Flipkart for $16 billion
The Flipkart-Walmart deal is finally official after weeks of rumours and speculation. The Flipkart acquisition was first announced by investor Softbank’s CEO and founder Masayoshi Son in an investor call, followed by an official statement from Walmart. This is the largest e-commerce deal in the world, and is expected to bring huge returns for the co-founders, investors and other shareholders. The deal will bring logistics expertise to Flipkart, and will help it compete better against Amazon, which is gaining fast in the Indian e-commerce market.
Flipkart-Walmart Deal Explained in 10 Points
- Walmart will acquire a 77 percent stake in Flipkart for roughly Rs. 1.07 lakh crores, including around Rs. 13,450 crores as cash infusion. The two companies are also in discussions with additional potential investors who may join the round, which will mean a lower stake for Walmart once the deal is finalized; however, it will maintain a clear majority ownership in the e-commerce brand.
- Flipkart co-founder Binny Bansal, China’s Tencent Holdings, Tiger Global Management and Microsoft will hold the remaining shares in the company.
- Tencent and Tiger Global will remain part of the Flipkart board, and Walmart will nominate its own members to the board. The board will also include independent members.
- Co-founder Sachin Bansal, currently the group CEO for Flipkart, has reportedly sold his shares to Walmart and exited the e-commerce company. He is expected to net around Rs. 6,700 crores for his 5.5 percent stake.
- It is not yet clear whether Binny Bansal sold any part of his 5 percent stake to Walmart.
- Softbank acquired a 20 percent stake for about Rs. 16,800 crores in Flipkart through its Vision Fund last year, and the exit will give it approximately Rs. 27,000 crores. Naspers also sold its 11.18 percent stake for about Rs. 14,800 crores.
- Amazon had reportedly offered to buy a stake in Flipkart last week, but the offer was not considered. A Flipkart-Amazon acquisition would have faced regulatory challenges.
- The Flipkart-Walmart deal will have to gain the approval of Competition Commission of India and other regulatory bodies. The deal gives Walmart entry into the fast-growing Indian e-commerce market, where it will compete with rival Amazon for supremacy.
- With the sale valuing Flipkart at roughly roughly Rs. 1.35 lakh crores, employees with ESOPs about to vest will make a windfall as this is the highest valuation of the e-commerce player yet.
- Walmart in a statement said it “supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.”