Walmart Inc. (WMT) is looking to acquire a majority stake in Indian e-commerce company Flipkart Online Services Pvt. for at least $12 billion. Flipkart’s largest investors, Tiger Global Management and SoftBank Group Corp., are in support of the deal, with Tiger Global ready to sell almost all of its 20% holding. SoftBank is also set to sell a majority of its stake which is over 20%.
If all works out, Walmart will get a 60% to 80% stake in Flipkart with a valuation of approximately $20 billion. Although a final decision is expected over the next two weeks, some matters remain to be ironed out. These include the size of the stakes the investors sell, Walmart’s final stake and the position of Flipkart’s founders following the transaction.
The deal could see changes in terms or a total cancellation depending on the situation. Neither Walmart nor Flipkart provided any comments on the matter.
While Walmart and Amazon (AMZN) both had an interest in Flipkart which was reciprocated by the Indian company, eventually Walmart was favored as a deal with the US retailer was likely to get approved easily, given that Walmart is yet to enter e-commerce in India. Amazon, on the other hand, enjoys a strong position in India and is Flipkart’s rival.
Apart from the US and China, India is a country with vast potential for e-commerce. Companies like Amazon and Walmart have not managed to make much of a dent in China with Alibaba (BABA) running the show there. Through Flipkart, Walmart can gain access to growth opportunities in India as well as build a stronghold in terms of competition with Amazon. Flipkart also will gain massive strength with Walmart’s support.
Amazon has already gained a strong foothold in India and continues to increase investments in the country. Amazon too has eyes on Flipkart, and if things don’t work out with Walmart, the online giant might just swoop in with its own sweet deal for Flipkart.
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