Walmart is expected to ink a deal with Flipkart, India's largest eCommerce player, by the end of June, marking what may be its largest purchase of an online retailer ever.
Reuters, citing two people with direct knowledge of the matter, reported that acquiring a stake in Flipkart will position Walmart better to compete against Amazon, which is the second biggest eCommerce company in India. Last week Reuters reported Walmart had finished conducting its due diligence of Flipkart and made an offer to purchase a 51 percent or more stake in the company for $10 billion to $12 billion. There have been reports that Amazon is looking to make a counteroffer, noted Reuters.
The sources said Walmart plans to buy new and existing shares of Flipkart, with the new ones valuing the online retailer at $18 billion or more. The price for the existing shares gives Flipkart a value of roughly $12 billion, noted the report. Softbank, which owns around one-fifth of Flipkart, isn't likely to give up its share because of the lower offer price for the existing shares, sources told Reuters. The news agency had previously reported that other Flipkart investors including Tiger Global, Accel and Naspers are likely to unload their entire stakes in Flipkart to Walmart if a deal is inked.
For Walmart, getting a stake in Flipkart would enable it to access a market of more than 1 billion people. Unlike rival Amazon, which has invested in India and now trails Flipkart closely, it has had a tough time cracking the Indian market. While Amazon is reportedly going after Flipkart as well, investors in the Indian company are concerned that any deal would face regulatory issues since it would be combining two of the leading players, and as a result favor the Walmart offer. For Flipkart, the stake sale to Walmart would give it more power to take on Amazon and give it access to a partner that has tons of experience in retail, logistics and supply chain management, noted Reuters.