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Walmart, Alphabet together may buy over 70% in Flipkart

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MUMBAI/ NEW DELHI: India’s largest online retailer Flipkart is set to sell more than 70% stake to Walmart and Google’s parent Alphabet, in a deal which will value the company at $20 billion, multiple people familiar with the development said.

The final shareholder agreements triggering India Inc’s largest M&A is expected to be signed over the weekend and a formal announcement is due mid-next week. While Walmart is expected to get a 55-61% stake in Flipkart, Alphabet will pick up around 10% in Flipkart, bringing to an end months of deal-making.

Amazon, which was also in the race to acquire a substantial stake in Flipkart, did not find favour from most of the company investors even as SoftBank rallied for the Jeff Bezos-led tech giant. The transaction will involve a bunch of Flipkart’s shareholders partially or completely selling their stakes to the Walmart-led group.

TOI in its edition on May 4 reported that Flipkart’s co-founder and executive chairman, Sachin Bansal, will sell his entire 5.5% stake in the company he founded, along with Binny Bansal, back in 2007. Walmart will retain Kalyan Krishnamurthy, the present Flipkart CEO, and Binny, after the takeover by the world’s largest brick-and-mortar retailer.

Two prominent Flipkart investors, New York-based Tiger Global and China’s Tencent, and Binny will retain shares and board seats. However, Tiger and Binny would pare down their stakes in the e-commerce major. There has been speculation about Binny selling his entire stake of about 5% and being given an employee stock ownership plan (ESOP) after the takeover in lieu of his present ownership in Flipkart.

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Walmart did not comment on the matter, while queries sent to Flipkart and Alphabet did not elicit a response till the time of going to press. “The exact shareholding pattern would emerge only in the next 24 hours as Binny and Krishnamurthy are leading Flipkart’s final negotiation. Right now the legalities on the deal are being worked out,” a person familiar with the deal talks said.

Krishnamurthy, who will join the Flipkart board, is set to emerge as a key figure in leading the e-tailer under the Walmart ownership. He was brought in by Tiger Global to counter the Amazon onslaught in 2016 and was later handed over the CEO mantle in January last year. Under his regime the e-tailer has been able to win back its lead in key categories like smartphone and electronics, after having ceded market share to Amazon. Tiger Global’s decision to remain a shareholder, along with Krishnamurthy and Binny’s continuation after the transaction, suggests significant shareholder realignments took place on the Flipkart board.

Tiger currently holds about 20% stake in the online marketplace, which began life as an ebookstore, while Japan’s Soft-Bank owns 23% in the company. SoftBank, which was in favour of Flipkart striking a merger deal with Amazon, may look to exit with 1.5 times return after investing $2.5 billion just over ten months ago in the e-tailer.

Updated: May 5, 2018 — 5:26 am

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