Snapdeal Holds Out For A Better Offer On Flipkart Takeover

India’s second- and third-largest eCommerce firms, Flipkart and Snapdeal, have been in talks for months about a possible alliance to keep ahead of Amazon, but Snapdeal wasn’t quite ready to sell out to Flipkart – at least, not for less than the $1-billion valuation Flipkart had previously indicated.

The takeover bid came in at around $850 million, Reuters reported. This came after Snapdeal opened its books to Flipkart in May for the larger company to perform due diligence on the $1-billion estimation it had stated in a non-binding term sheet.

Auditor Ernst & Young and law firm Khaitan & Co. performed the due diligence, and it came up clean. One source close to the matter told Reuters there was no reason for Flipkart to knock down the price. Another source said the lowball offer was simply a negotiation tactic.

Snapdeal is operated by Jasper Infotech and counts Japan’s SoftBank as its biggest investor. Flipkart is backed by Microsoft Corp., China’s Tencent Holdings and online auction site eBay.

A merger between the two Indian eCommerce firms would please SoftBank, granting it a large stake in India’s biggest eCommerce player if an all-equity deal were realized. And it would please Flipkart by giving it a boost in the race against Amazon.

Three sources told Reuters that merger talks between Snapdeal and Flipkart would continue, possibly with a deal to be reached by mid-July – this despite the fact that the exclusivity period around the talks ended July 2, and Snapdeal could theoretically start talking to other suitors as well.

Flipkart’s top investor, Tiger Global, reportedly indicated that it was going to revert with a new offer, said the sources.

Snapdeal’s logistics arm Vulcan Express and its digital payments venture FreeCharge are not part of the conversation and may be sold separately.