Walmart Pays $16B For A 77 Percent Stake In Flipkart

Walmart announced earlier on Wednesday (May 9) that it inked a deal to invest in Flipkart for $16 billion, giving the retailer a 77 percent stake in the India-based eCommerce company.

In a press releaseWalmart said the deal still needs the approval of regulators in India, but that once that step is completed, the retailer will own 77 percent of Flipkart. The remainder of the business will be held by existing shareholders, including Flipkart Co-Founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft.

“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Doug McMillon, Walmart’s president and chief executive officer, in the press release announcing the deal. “As a company, we are transforming globally to meet and exceed the needs of customers, and we look forward to working with Flipkart to grow in this critical market. We are also excited to be doing this with Tencent, Tiger Global and Microsoft, which will be key strategic and technology partners.”

Under the terms of the deal, the investment in Flipkart includes $2 billion of new equity funding, which Flipkart will use to accelerate growth. The two companies are also in talks with other potential investors who could join the round, lowering Walmart’s investment stake once the deal is complete. Walmart noted that even with other investors, the retailer will still hold a majority stake in Flipkart. Tencent and Tiger Global will remain on Flipkart’s board, which will also include Walmart executives and independent members.

To fund the $16 billion transaction, Walmart plans to use newly issued debt and cash on hand. The retailer expects the deal to have a negative earnings-per-share (EPS) impact in the fiscal year 2019 of $0.25 to $0.30. In fiscal year 2020, the company should have an EPS headwind of about $0.60, comprised of operating losses of about $0.40 to $0.45 a share and an interest expense of about $0.15 a share. Walmart expects to maintain its share buyback program and its credit profile even with the deal.