Walmart pays $16B for majority stake in India's Flipkart, escalating Amazon rivalry

Alicia Cross
May 10, 2018

The largest offline retailer Walmart has signed a definitive agreement with India's e-commerce giant Flipkart to become the largest shareholder.

The remainder of the business will be held by existing investors, including Flipkart's co-founder Binny Bansal, Tencent, Tiger Global and Microsoft.

The transaction is subject to regulatory approval and is expected to close later in the year. The deal is a mix of $2 billion in new equity and Walmart buying out other shareholders. Additionally, Walmart will also be supporting Flipkart's ambition to transition into a publicly-listed, majority-owned subsidiary in the future. Walmart will retain a 42 percent stake in that combined company. Walmart chief executive Doug McMillon is reportedly flying to Flipkart's headquarters in Bengaluru this week to announce final closing of the deal.

SoftBank, through its Vision Fund, had parked US$2.5 billion in the Indian company for a 20 percent share. Sachin Bansal will sell his entire stake to Walmart while Binny Bansal will sell part of his to the American retailer, The Economic Times reported on Tuesday.

The Walmart investment, company officials said, will also allow Flipkart to leverage Walmart's omnichannel retail expertise and supply chain knowledge while simultaneously providing Walmart insight into the Indian retail marketplace. That could help ease concerns by Indian regulators.

After weeks of back-and-forth, hearsay, and rumors regarding major grocery rivals Amazon and Walmart and their race for a top spot in one of the largest, fastest-growing economies in the world, Walmart has finally crossed the finish line first.

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But instead of competing with Flipkart, Walmart has essentially taken over the company.

A Walmart-Flipkart deal also provide a boost to India's e-commerce market, which remains small compared to other mature markets.

According to three people aware of the terms of the deal, Myntra comprised $5.5-$6.5 billion of the $21 billion value at which the Flipkart group was bought.

Coming to acquisitions, Flipkart acquired online apparel retailer Myntra at about Dollars 300 million in 2014 and another fashion retailer Jabong for USD 70 million and payment startup PhonePe in 2016. "Walmart's link with Flipkart has changed great deal of equation for the company and its investors", Saurav Srivastav, Indian Angel Network told the channel and added that the move will open opportunities for Walmart to experiment in a big market.

With months of speculations, rumors and even the unlikeliest scenario of an Amazon takeover of Flipkart, this has been one of the longest take-over sagas in recent years. "This is a time-consuming process and both these companies need patient capital to capture the online retail opportunity".

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