For about a month now, there have been talks of Flipkart acquiring Snapdeal. Initially, on the 12 of May, Flipkart made an informal offer of $1 billion that was accepted by all stakeholders in Snapdeal including parent company Jasper Infotech Pvt. Ltd.
Following this agreement, the due diligence process was expected to start within a week of the term sheet being signed. The official term sheet was signed by Flipkart about a month ago on the 24 of May, valuing the deal at approximately $1 billion with no finalization on the price yet. Flipkart first intended to go over Snapdeal’s finances and transactions before deciding on a final price.
While there were initial disagreements with shareholders Kalaari Capital and Nexus Venture Partners, these were resolved following SoftBank’s intervention.
Now, the merger deal is faced with yet another obstacle in the form of a complex due diligence process that was started sometime last month. This delay means that the deal will now hopefully conclude in July, provided there are no further obstacles.
With this development comes the news that Flipkart may actually buy Snapdeal for less than the $1 billion that has been constantly repeated so far. While the deal is still expected to conclude somewhere in the $700-900 million price range, there are also rumours that the buyout could be worth only $400. These rumours however, have not been confirmed yet.
Further, there is still some dissent expressed by smaller shareholders in the company including PremjiInvest which has already written to Snapdeal’s board twice, asking for security. The investment arm of Azim Premji largely has an objection to the huge amounts of money that are being paid out to Kalaari Capital, Nexus Venture Partners, as well as Snapdeal’s founders Kunal Bahl and Rohit Bansal.
Other small shareholders include Intel Capital, Bessemer Venture Partners, BlackRock, Temasek, and the office of Ratan Tata, former chairman of Tata Group. There is speculation that this Premji conflict can further hamper the progress of this Flipkart-Snapdeal merger.
The continuous delays on this deal have supposedly also affected a rumoured deal between Paytm and FreeCharge which is postponed to until after this merger happens. Both deals are being orchestrated by SoftBank which is waiting on one to happen before pushing the next.
