Flipkart is very near to officially close its acquisition deal of Snapdeal as the company’s three lead investors have agreed to the sale. However, this transaction may even need approval from two of the India’s most powerful businessmen namely — Azim Premji and Ratan Tata.
SoftBank, the largest investor in Snapdeal, has been continually pushing for the sale of the homegrown e-tailer to Flipkart. While initially Kalaari Capital and Nexus Venture Partners — the early investors of Snapdeal were opposing the move, SoftBank was able to convince them.
However, there are several important investors who are yet to sign on to the deal, including the family offices of Azim Premji, the billionaire chairman of tech services giant Wipro, and Ratan Tata, the former chairman of Tata Group. But, it is not yet clear how significant a hurdle that will be towards the finalization of the deal.
Last week, Flipkart made an informal $1 billion offer for the acquisition of Snapdeal, a significant drop from the company’s peak valuation of $6.5 billion. The offer is non-binding and a formal term sheet is expected to be signed over the next few days, with the due diligence process expected to commence within a week.
If due diligence goes smoothly, a term sheet specifying cash and stock for each shareholder will follow and a final agreement could be signed by mid to late June, said the people aware of the matter.
Under terms of the preliminary pact, Snapdeal’s two founders Kunal Bahl and Rohit Bansal will together receive about $30 million with a similar sum to be set aside for Snapdeal’s nearly 2,000 employees. As of their primary investors, Kalaari Capital — one of the two early investors in the startup, is set to get $30 million, while Nexus will receive twice that amount for its larger stake.
The Flipkart-Snapdeal combination is aimed at creating a stronger local competitor to fight the battle of e-commerce market share against Amazon.in. CEO Jeff Bezos had earlier committed to investing around $5 billion for the Indian operations, and since then, the company is aggressively expanding its business in India. This merger deal is, however, being opposed by the online merchants association, according to a newly released report.